Power and Interdependence

Power andInterdependence

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Power andInterdependence

Fourth Edition

Robert O. KeohanePrinceton University

Joseph S. NyeHarvard University

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Library of Congress Cataloging-in-Publication DataKeohane, Robert O. (Robert Owen)

Power and interdependence / Robert O. Keohane, Joseph S. Nye. — 4th ed.

p. cm.Includes bibliographical references and index.ISBN-13: 978-0-205-08291-9 (alk. paper)ISBN-10: 0-205-08291-2 (alk. paper)1. International relations. 2. International economic relations.

I. Nye, Joseph S. II. Title. JX1395.K427 2011327—dc22

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Brief Contents

FOREWORD by Fareed Zakaria xiii

PREFACE TO THE FIRST EDITION xvi

PREFACE TO THE SECOND EDITION xix

PREFACE TO THE THIRD EDITION xxiii

PREFACE TO THE FOURTH EDITION xxvii

PART I Understanding Interdependence 1

CHAPTER 1 Interdependence in World Politics 3

CHAPTER 2 Realism and Complex Interdependence 20

CHAPTER 3 Explaining International Regime Change 33

PART II Regime Change in Oceans and Money 53

CHAPTER 4 The Politics of Oceans and Money: HistoricalOverview 55

CHAPTER 5 Complex Interdependence in Oceans and Money 86

CHAPTER 6 The Politics of Rule-Making in Oceans and Money 112

PART III Regimes and Two Bilateral Relationships 143

CHAPTER 7 United States Relations with Canada and Australia 145

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PART IV The United States and ComplexInterdependence 191

CHAPTER 8 Coping with Interdependence 193

PART V Globalism and the Information Age 213

CHAPTER 9 Power, Interdependence, and the Information Age 215

CHAPTER 10 Power, Interdependence, and Globalism 228

PART VI Second Thoughts on Theory and Policy (1989) 265

NOTES 301

INDEX 326

vi Brief Contents

FOREWORD by Fareed Zakaria xiii

PREFACE TO FIRST EDITION xvi

PREFACE TO SECOND EDITION xix

PREFACE TO THIRD EDITION xxiii

PREFACE TO FOURTH EDITION xxvii

PART I Understanding Interdependence 1CHAPTER 1 Interdependence in World Politics 3

THE NEW RHETORIC OF INTERDEPENDENCE 5INTERDEPENDENCE AS AN ANALYTIC CONCEPT 7POWER AND INTERDEPENDENCE 9INTERNATIONAL REGIME CHANGE 16

CHAPTER 2 Realism and Complex Interdependence 19THE CHARACTERISTICS OF COMPLEX

INTERDEPENDENCE 20Multiple Channels 21Absence of Hierarchy among Issues 22Minor Role of Military Force 22

THE POLITICAL PROCESSES OF COMPLEXINTERDEPENDENCE 24Linkage Strategies 25Agenda Setting 26Transnational and Transgovernmental Relations 28Role of International Organizations 29

CHAPTER 3 Explaining International Regime Change 32AN ECONOMIC PROCESS EXPLANATION 32OVERALL POWER STRUCTURE EXPLANATION 35

Eroding Hegemony 35Limitations of an Overall Structure Explanation 39

Contents

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viii Contents

ISSUE STRUCTURE 42Limitations of Structural Explanations 44

AN INTERNATIONAL ORGANIZATION MODEL 46COMBINING EXPLANATIONS 49

PART II Regime Change in Oceans and Money 53CHAPTER 4 The Politics of Oceans and Money: Historical

Overview 55THE INTERNATIONAL MONETARY ISSUE AREA 57

The International Gold Standard before 1914 58International Monetary Regimes, 1920–76 63

THE OCEANS ISSUE AREA 75Defining the Issue Area 76The Classical Free Seas Regime 78Regime Periods, 1920–75 79The Changing Agenda of Oceans Politics 83

CONCLUSION 84

CHAPTER 5 Complex Interdependence in Oceans and Money 85THE CONDITIONS OF COMPLEX INTERDEPENDENCE 85

Role of Force 85Absence of Hierarchy among Issues 90Multiple Channels of Contact 93Money, Oceans, and Complex Interdependence 96

THE POLITICAL PROCESS IN MONEY AND OCEANS 97Goals of Actors 98Instruments of State Policy 102Agenda Formation 103Linkage of Issues 104Roles of International Organizations 106

CONCLUSION 107

CHAPTER 6 The Politics of Rule-Making in Oceans and Money 110ECONOMIC PROCESSES AND REGIME CHANGE 110OVERALL STRUCTURE AND REGIME CHANGE 112

Erosion of the Oceans Regime 113International Monetary Regimes 115

Contents ix

ISSUE STRUCTURE AND REGIME CHANGE 117International Monetary Issue Area 119Oceans Politics 122

INTERNATIONAL ORGANIZATION AND REGIME CHANGE 125Oceans Politics 126The International Monetary Area 129

LIMITS OF SYSTEMIC EXPLANATIONS: DOMESTIC POLITICS AND LEADERSHIP 131

CONCLUSION 135

PART III Regimes and Two Bilateral Relationships 141CHAPTER 7 United States Relations with Canada

and Australia 143CANADIAN-AMERICAN RELATIONS AND COMPLEX

INTERDEPENDENCE 144AUSTRALIAN-AMERICAN RELATIONS AND COMPLEX

INTERDEPENDENCE 149IDENTIFYING ISSUES AND OUTCOMES:

CANADA–UNITED STATES 155IDENTIFYING ISSUES AND OUTCOMES:

AUSTRALIA–UNITED STATES 166COMPARING THE POLITICS OF AGENDA FORMATION 171ACCOUNTING FOR DIFFERENCES IN OUTCOMES 173REGIME CHANGE: ALTERNATIVE EXPLANATIONS 179

PART IV The United States and ComplexInterdependence 187

CHAPTER 8 Coping with Interdependence 189EXPLANATORY MODELS AND CONDITIONS OF

WORLD POLITICS 189POWER IN COMPLEX INTERDEPENDENCE 192TRENDS TOWARD COMPLEX INTERDEPENDENCE 193LEADERSHIP IN COMPLEX INTERDEPENDENCE 196MULTIPLE LEADERSHIP AND POLICY COORDINATION 198BUILDING THE LEGITIMACY OF INTERNATIONAL

REGIMES 200INTERNATIONAL AND DOMESTIC ORGANIZATION 201CONCLUSION 207

x Contents

PART V Globalism and the Information Age 209CHAPTER 9 Power, Interdependence, and the

Information Age 211THE INFORMATION REVOLUTION AND COMPLEX

INTERDEPENDENCE 213INFORMATION AND POWER 216THE PARADOX OF PLENTY AND THE POLITICS OF

CREDIBILITY 219

CHAPTER 10 Power, Interdependence, and Globalism 224GLOBALIZATION AND INTERDEPENDENCE 225

The Dimensions of Globalism 226Thick Globalism: Made in America? 229Connectivity, Sensitivity, Vulnerability 231Illustrating Interdependence and Globalism 234

CONTEMPORARY GLOBALISM: WHAT’S NEW? 236Density of Networks 236Reduced Communications Costs and Institutional Velocity 239Transnational Participation and Complex Interdependence 240Is Distance Becoming Irrelevant? 242

GLOBALIZATION AND THE END OF THE COLD WAR 244The End of the Cold War and the Dimensions of Globalism 244Conjunctural Politics and the Americanization of Globalism 246

POLITICS, EQUITY, POWER, AND GOVERNANCE 247Globalism and Domestic Politics 248Equity and the Political Effects of Increasing Inequality 250Power and Networks 252Governance of Globalism 254

PART VI Second Thoughts on Theory and Policy (1989) 259Afterword 261

1. PRINCIPAL THEMES OF POWER AND INTERDEPENDENCE 261

2. THE RESEARCH PROGRAM OF POWER ANDINTERDEPENDENCE: A CRITIQUE 266Interdependence and Bargaining 267Complex Interdependence 269International Regime Change 272

Contents xi

3. LIMITATIONS OF STRUCTURAL THEORY: SYSTEMICPOLITICAL PROCESSES 275

4. PERCEPTIONS AND LEARNING 278CONCLUSION 280

Two Cheers for Multilateralism 282

THE NEED FOR REGIMES 284UNREALISTIC VISIONS 286

Do Not Try to Recapture the Past 286Ask Whether the World Really Needs It 287Build on Shared Interests 288Use Regimes to Insure against Catastrophe 289The Best Enforcement Is Self-Enforcement 289Look for the Right Moment 290Use Regimes to Focus U.S. Attention on the Future 291

Regime Maintenance 292

United Nations Peacekeeping 293International Debt 293Exchange Rates 293

NOTES 295

INDEX 319


BY FAREED ZAKARIA

“The world is about to conduct a vast test of the theories of war and peace putforward by social scientists, who never dreamed that their ideas would be tested bythe world-historic events announced almost daily in newspaper headlines.” Sowrote John J. Mearsheimer in a celebrated essay that was published in 1990 inThe Atlantic. His prediction proved accurate. The end of the Cold War dissolved anelaborate international system that had ordered and dominated the world for half acentury. International life was certain to change. But how?

For many who saw international relations from a realist prism, it was certainthat the end of the fixed structure of bipolarity would mean a marked rise in insta-bility, as states began the eternal search for security without the protections andrestraints of the alliance structure of the Cold War. “My argument is that theprospect of major crises, even wars, in Europe is likely to increase dramatically nowthat the Cold War is receding into history,” wrote Mearsheimer. As the Sovietempire crumbled, there were events that seemed to confirm this prophecy, mostimportantly the war in the former Yugoslavia. But what was striking even then was,as a multiethnic Yugoslavia dissolved amidst horrific violence, the great powers ofEurope––and for a long while the United States––spent most of their energy tryingto avoid getting involved in it. Far from searching for geopolitical advantagethrough the conflict, Germany, France, and Britain were expending most of theireffort in steering clear of any involvement. Historically war had been seen as anopportunity for great power advancement; now it was seen as a dangerous drag.

Twenty years after that Atlantic essay, what is striking about world affairs is theabsence of great power conflict. It is possible to point to an incident here or therewhere the United States and Russia have clashed verbally or the United States andChina have angled for advantage, but measured by the usual metrics of great powerconflict––wars, proxy wars, arms races, and the like––the absence of great powerconflict is the dominant geopolitical reality of our age. Twenty years after the end ofthe Cold War, Japan and Germany have remained civilian great powers, despitehaving the second and third largest economies in the world. Rising great powerslike China and India are certainly building up their military forces but by historicalstandards, they are also remarkably focused on economic and technological power.

Realists might have been right in theory but wrong in coding their cases.Europe’s great powers might have stopped acting as such because they were actuallyno longer major actors on the world stage, as measured by their shrinking share ofglobal output and military might. But then, how to explain Asia? Another distin-guished scholar, Aaron Friedberg, conceded that Europe might have turned pacific,

Foreword

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because of war-weariness, trade, democracy, international institutions, and a postna-tional mentality, but Asia showed few of these traits, filled as it was with growing,traditional powers with historical animosities, varied internal polities, and few insti-tutions binding them together. Friedberg’s essay, making Mearsheimer’s predictionbut in Asia, was published in 1993. Seventeen years out, Asia has yet to confirm thehypothesis in any measure.

Or perhaps, the problem was the system was not multipolar at all. The columnistCharles Krauthammer argued in the same year that Mearsheimer published his essaythat we were in fact not moving from bipolarity to multipolarity but to a “unipolarmoment,” a system utterly dominated at every level by the United States. Thatdescription shed enormous light on the subsequent decade and a half, as the Americaneconomy boomed, its military strength was greater than all other powers combined,and its model seemed to shine brightly in every corner of the globe. Almost everyinternational problem somehow gravitated into America’s orbit and every crisis seemeda product of this unipolarity––think of the wars in Afghanistan and Iraq.

But where is the balancing coalition that realism would predict to oppose suchmassive, overwhelming hegemony? One can point to a few maneuvers by Russiaand China but there is nothing serious now that unipolar order is weakening.Between the attacks of 9/11, the Iraq War, the financial crisis, and perhaps mostcrucially the “rise of the rest,” the growth of new powers, the United States nolonger dominates the international order as it once did. And yet, the systemremains strikingly stable with crises rarely spilling over. After 9/11, the oft-predictedplague of terror attacks throughout the Western world never materialized. The Iraqwar did not draw in any of its neighbors. And despite many efforts by groups inter-ested in large defense budgets, the effort to describe Chinese or Russian behavior asgenuinely threatening has simply not worked. Despite the collapse of a great multi-national land empire, the Soviet Union, the rise of another great power, China, andseveral middle powers, there have been few conflicts or wars. After the worsteconomic crisis since the Great Depression, the follow-on political and socialdisruptions were minor. Crucially, the great powers seem largely intent of developingeconomically rather than gaining military control of foreign lands.

In 1986, the historian John Lewis Gaddis wrote an essay entitled, “The LongPeace,” in which he argued that the absence of great power conflict since 1945 until1986 was the longest stretch of great power peace in centuries. Given that it hasnow extended for 34 more years, it has surely become an even more intriguinggeopolitical stretch of time, deserving of inquiry. From the origins of the modernstate system, rooted in the terrible religious wars in and around Germany in theseventeenth century, most of the scholarship of international relations has tried toexplain instability and war. What we need to explain now is stability and peace.

The most important insight that might help us explain the dynamic of thecurrent world order lies in the concept of interdependence, pioneered and systemat-ically explored by Robert Keohane and Joseph Nye in Power and Interdependence,the classic work of international relations theory you are about to read. The ideaof interdependence has been around for a while and not simply in the scholarlyliterature. With the rise of modern trade in the eighteenth and nineteenth

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centuries, there came with it writers––often economists––who posited that warwould now become impractical and unprofitable. Such views have often beencaricatured. Norman Angell is often described as the best-selling British author whoprophesied that war was obsolete––on the eve of World War I. In fact, Angell’sargument was that a large-scale war between Europe’s great powers would be socostly to all parties that even the winner would be impoverished by it. He certainlyhoped and wished that this would make war obsolete but clearly he did not believethat interdependence alone would prevent war or he would not have spent his lifetrying to urge statesmen not to use military force. As for his actual prediction, itproved only too accurate. In fact, John Maynard Keynes’ legendary tract, TheEconomic Consequences of the Peace, simply lays out after the fact and in detailwhat Angell predicted––that destroying the German economy through cripplingreparations would cause the economies of Britain and France to suffer as dearly.Decades later, as trade boomed and Western economies had once again become inter-twined, Richard Cooper revived the notion of interdependence in an elegant essay.

Keohane and Nye took these assorted ideas and put forward a powerful, coher-ent theory, operating at level of the international system, and thus with the greatexplanatory power. It conceives of interdependence as broader than just the realitiesof economics, recognizing, for example, that the mutual vulnerability of nucleardestruction stopped the Soviet Union and the United States from going to war.Nuclear deterrence is a form of interdependence. The theory is not one that rejectsrealism but rather one that sees realism as an insufficient explanation for themechanics of the modern world. It posits a spectrum, one that has at one end arealist “ideal type,” in which states are concerned only with survival and securityand for whom war is an ever-present option. At the other end lies the world of“complex interdependence,” in which states are mutually dependent on each otherfor their well-being. Any given outcome in international life will depend uponwhere a state sits on that spectrum.

This spectrum will provide a powerful set of insights into the twenty-first century.The most important question that faces scholars of international affairs––and the restof us who inhabit the world––is whether the relationship between the world’s mostimportant rising power and its established power will be peaceful or bellicose. Will therise of China––and the reaction of America to that rise––have the effect that so manygreat power ascensions have had in the past, leading to general war? Or will the newconstraints of economies and nuclear deterrence create powerful incentives on bothsides for a peaceful, though highly competitive, relationship? So far, despite a rise thatrivals or even outstrips those of any previous rising power, China has been largelyuninterested in a grand global role, particularly a military one. The United States, forits part, has sought to work with rather than against China. If that changes, on eitherside, it will surely alter the basic stability of the global system.

This book is justifiably regarded as a classic in the field but I would argue that itdeserves even greater attention today. Its insights have endured through a longand turbulent period of international change. The research agenda it suggests isricher today than when it was first published. And the consequences of gettinginternational relations right has never been more important.

As students in the late 1950s and early 1960s, we were taught to look at interna-tional politics through “realist” glasses, which emphasized the ever-present possibil-ity of war among sovereign states. As our earlier work indicates, we soon becameuneasy about this one-sided view of reality, particularly about its inadequate analysisof economic integration and of the roles played by formal and informal interna-tional institutions. Our collaboration began in 1968 when, as new members of theboard of editors of International Organization, we decided to edit a special issue ofthat journal to criticize traditional views of world politics and to demonstrate therelevance of international organization broadly conceived.1

We decided to write the present book, after Transnational Relations and WorldPolitics was published in the summer of 1971, for two main reasons. Although inthat volume we had pointed out significant problems with realist theory, par-ticularly in the area of international political economy, we had not provided analternative theory. We still needed to fit transnational relations into a largerframework of world politics if we were to complete the analytical task we hadbegun. From a policy standpoint, we thought that significant improvements inAmerican policy on issues involving transnational relations and internationalorganizations were unlikely unless the premises of policy were changed. We believedthat many of the failures of American foreign policy in these areas had their rootsin the limitations of realist assumptions. For both analytical and policy reasons,therefore, we sought to write a book that would put into a broader context theclassic realist analysis that Hans Morgenthau’s Politics Among Nations, among otherworks, had bequeathed to the current generation.2

Our analytical and policy concerns help to explain the orientation of this book.Our central policy concern had to do with American foreign policy, but the book’sfocus is completely different from that of most books and articles on this subject.

Preface to theFirst Edition

1International Organization 25, no. 3 (Summer 1971); later published as Transnational Relations and WorldPolitics (Cambridge, Mass.: Harvard University Press, 1972).

2Some of our thoughts on the subject of this book have appeared in earlier articles, but they have been sogreatly altered in form and content that only a few fragments remain in the present volume. For these weacknowledge permission from the University of Wisconsin Press to draw from the following articles: C. FredBergsten, R. Keohane, and J. Nye, “International Economics and International Politics: A Framework forAnalysis,” International Organization 29, no. 1 (Winter 1975); R. Keohane and J. Nye, “Introduction: TheComplex Politics of Canadian-American Interdependence,” International Organization 28, no. 2 (Autumn1974); J. Nye, “Transnational Relations and Interstate Conflicts: An Empirical Analysis,” International Organi-zation 28, no. 4 (Autumn 1974).

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Because we are concerned with the premises of policy, our major emphasis is on thechanging nature of the international system and how to understand it. Only in thelast chapter do we draw lessons for foreign policy. Our two country-oriented casestudies, however, are focused on the United States. Yet throughout the book, ouremphasis is on theory. The cases were selected for their potential significance fortheory as much as for their intrinsic policy importance. Since the United States isthe most important actor in the system, our focus on American actions can be justi-fied on theoretical as well as policy grounds. In addition, each of our major cases isexamined over at least a fifty-year period to help us understand underlying forces ofstability and change. Our method is not simply historical; we have analyzed thecases according to a theoretical and comparative scheme that we elaborate inchapters 1–3. This approach bears some resemblance to what our teacher StanleyHoffmann called “historical sociology” over a decade ago.3 We try to quantify whatwe can, but we stress theory over method and understanding the premises of policyover charting a detailed course of action.

In this book we try to understand world politics by developing explanations atthe level of the international system. This does not mean that we regard the domes-tic politics of foreign policy as unimportant. Quite the contrary. Foreign policy anddomestic policy, as we repeatedly emphasize, are becoming increasingly difficult todisentangle. Nevertheless, the complex relations between foreign and domesticpolicy make it essential to know how much one can explain purely on the basis ofinformation about the international system. In this sense, we try to discover whatcannot be explained on the basis of international factors, as well as what can be soexplained. Thus, although comparative foreign policy is not the subject of this book,we hope that students of comparative foreign policy will find our analysis useful—ifonly as a starting point for their attempts to explain patterns of national action.

We do not claim that our explanations of change and stability in world politicsare the only ones that could be developed for this purpose, even at the internationallevel. We have not, for example, included a Marxist formulation. Many Marxistsadopt what we call an overall structure approach, although unlike realists, theyaccept a class theory of the foreign policy process. Some Marxists, however, focus ondirect relations among capitalists: in these formulations, multinational corporationsare important in their own right as political actors.4 Yet, as far as we could determine,

3Stanley Hoffmann, ed., Contemporary Theory in International Relations (Englewood Cliffs, N.J.: Prentice-Hall, 1960).

4This statement certainly applies to much of the literature on “international dependency,” which focuseson relations between developed and underdeveloped countries (but which is by no means exclusively Marxistin character). Apart from this dependency literature, explorations of this theme from a Marxist point of viewcan be found in Stephen Hymer, “The Internationalization of Capital,” Journal of Economic Issues (March1972); and Ernest Mandel, Europe vs. American Contradictions of Imperialism (New York: Monthly ReviewPress, 1970), especially chapters 1–6, pp. 7–67. In the literature on dependency, the following are notable:Stephen Hymer, “The Multinational Corporation and the Law of Uneven Development,” in Jagdish Bhagwati(ed.) Economics and World Order from the 1970s to the 1990s (New York: The Free Press, 1972), pp. 113–140;Johan Galtung, “A Structural Theory of Imperialism,” Journal of Peace Research (1972): 81–117; OsvaldoSunkel, “Transnational Capitalism and National Disintegration in Latin America,” Social and Economic Studies(University of West Indies) 22, no. 1 (March 1973): 132–176; and Robert R. Kaufman et al., “A PreliminaryTest of the Theory of Dependency,” Comparative Politics (April 1975).

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there is not a generally accepted and clearly articulated Marxist theory of interna-tional regime change. We are neither sympathetic enough with the Marxistperspective, nor learned enough in its subtleties, to develop a Marxist model of ourown. It is to be hoped that Marxists will develop models of international regimechange to compete with or complement our own.

Friends have often asked us how we have managed to collaborate so intensivelyover such a long period of time. The short answer is by swallowing our pride while wetore apart each other’s chapters. Although collaboration invokes occasional frustra-tion, it produces the keen intellectual pleasure of rapid response and exploration ofideas. By and large, we have enjoyed the process. The theoretical chapters have gonethrough so many drafts that it is virtually impossible to identify the source of particu-lar ideas. Keohane took primary responsibility for the case studies on money andAustralia; Nye for oceans and Canada. Even here, however, the initial division oflabor does not accurately reflect the equality of our contributions to the final version.

Our transcontinental collaboration would not have been possible without thesupport of a Ford Foundation grant. In addition, over the last five years, financialhelp was provided to Nye by the Rockefeller Foundation and to Keohane by theUniversity Consortium for World Order Studies, the Johnson Foundation, and theStanford University Center for Research in International Studies. Nye is also grate-ful to Carleton University in Ottawa and to the Royal Institute of InternationalAffairs in London and its staff. We are both grateful to the Harvard Center forInternational Affairs and its two directors, Robert R. Bowie and Raymond Vernon,tireless and enormously supportive critics, without whose help it is hard to imaginethis book. It is also hard to imagine this book without the comments we receivedfrom so many critics and friends (the two categories are not mutually exclusive!).We particularly wish to thank Graham Allison, Jonathan Aronson, Robert Art,Francis Bator, Dan Caldwell, Stephen Cohen, Jorge Dominguez, Linda Cahn, DanFine, Alexander George, Robert Gilpin, Crauford Goodwin, Ernst Haas, RogerHansen, Jeff Hart, Barbara Haskell, Fred Hirsch, Stanley Hoffmann, Cavan Hogue,Ann Hollick, Ray Hopkins, Peter Jacobsohn, Robert Jervis, John Q. Johnson, PeterKatzenstein, James Keeley, Janet Kelly, Peter Kenen, Nannerl Keohane, CharlesKindleberger, Stephen Krasner, James Kurth, David Laitin, Peter Lange, CharlesLipson, Peyton Lyon, Rachel McCulloch, Michael Mandelbaum, Edward Miles,Theodore Moran, John Odell, Van Doorn Ooms, Rob Paarlberg, Wynne Plumptre,Richard Rosecrance, John Ruggie, Robert Russell, Philippe Schmitter, Ian Smart,Louis Sohn, Susan Strange, Harrison Wagner, and Dan Yergin. Ava Feiner, RobertPastor, Debra Miller, Alison Young, Kenneth Oye, and Constance Smith greatlyhelped our research on the case studies. Numerous officials of the American,Australian, and Canadian governments gave generously of their time in interviews.Emily Hallin supervised the reproduction and transmission of innumerable drafts atthe Stanford end of this transcontinental relationship. Beverly Davenport, AmyGazin, and Amy Contrada ably managed the typing of the manuscript and adminis-trative chores at Harvard. The contributions of Nannerl Keohane and Molly Nyewould require another book, not a mere preface, to recount.

No author is an island. We gladly toll our bell of thanks.

Theorists of international relations suffer from being too close to the events theydiscuss. When we wrote Power and Interdependence in the mid-1970s, dramaticchanges were taking place in world politics. By the beginning of the decade theVietnam War had become highly unpopular in the United States, and detenteseemed to have reduced the importance of the U.S.–Soviet nuclear competition. Atthe same time, international trade was growing more rapidly than world product;transnational corporations were playing dramatic political roles; and from 1971 onthe international monetary system was in flux. Meanwhile, the relative economicpredominance of the United States was declining as the European and Japaneseeconomies grew at more rapid rates. President Nixon and Secretary of StateKissinger spoke of the development of a five-power world, and futurologists such asHerman Kahn predicted the imminent arrival of a multipolar international system.5

On top of this came the oil crisis of 1973, in which some very weak statesextracted enormous resources from the strong. Hans Morgenthau wrote of what hecalled an unprecedented divorce between military and economic power based onthe control of raw materials.6 The vulnerability of Western societies at a period ofhigh commodity prices encouraged many less developed countries to believe that agreater transformation of power had occurred than was actually the case. Manytheorists reflected on these concerns. A representative view among the modernistwriters of the 1970s was that:

The forces now ascendant appear to be leaning toward a global society withouta dominant structure of cooperation and conflict—a polyarchy in which nation-states, subnational groups, and transnational special interests and communitieswould all be vying for the support and loyalty of individuals, and conflicts wouldhave to be resolved primarily on the basis of ad hoc bargaining in a shifting contextof power relationships.7

By the late 1970s the mood began to change, both in the United States and inthe United Nations. The United States government became more concerned aboutSoviet policy, and less sensitive to the policies and complaints of governments ofless developed countries. The experience of the Carter administration illustratesthis point. While campaigning in 1976, Jimmy Carter promised to reduce the

Preface to theSecond Edition

5Herman Kahn and B. Bruce-Briggs, Things to Come (New York: Macmillan, 1972).6Hans J. Morgenthau, “The New Diplomacy of Movement,” Encounter (August 1974): 56.7Seyom Brown, New Forces in World Politics (Washington: Brookings Institution, 1974), p. 186.

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defense budget, but by 1980 he was closer to Ronald Reagan’s position than to hisown previous view. Reagan’s election accentuated these trends. American policyfocused on East-West confrontation and scaled down North-South issues and therole of multilateral institutions. The defense budget increased in real terms for fivestraight years, and the United States was more willing to use military force (albeitagainst extremely weak states such as Grenada and Libya). Arms control wasdowngraded and the modernization of nuclear forces was intended to restore an “edge”for additional utility of military force. This shifting agenda was accompanied by aresurgence of realist analysis, for history seemed to have vindicated the realist model.

Just as some analysts in the 1970s overstated the obsolescence of the nationstate, the decline of force, and the irrelevance of security concerns, others in theearly 1980s unduly neglected the role of transnational actors and economic interde-pendence. Contrary to the tone of much political rhetoric and some political analy-sis, however, the 1980s did not represent a return to the world of the 1950s. Just asthe decline of American power was exaggerated in the 1970s, so was the restorationof American power exaggerated in the 1980s. Looking carefully at military andeconomic indices of power resources, one notes that there was far more change inpsychology and mood than in true indicators of power resources. The diffusion ofpower continued as measured by shares in world trade or world product. Economicinterdependence as measured by vulnerability to supply shocks eased in a period ofslack commodity markets (but it could change if markets tighten again and growthof economic transactions continues). Sensitivity to exchange-rate fluctuationsremained high. The costs of the great powers’ use of force remained higher than inthe 1950s. Moreover, despite rhetoric, the relations between superpowers did notshow a return to the Cold War period. Not only were alliances looser, but tran-sactions were higher and the relations between superpowers reflected a fair degreeof learning in the nuclear area.8 In our view, therefore, the analysis that we putforward in Power and Interdependence has not been rendered irrelevant by events.The real questions are not about obsolescence, but about analytical cogency.

In a sense, the 1970s and 1980s were merely the latest instance of a recurringdialectic between the two main strands in what has been called the “classicaltradition” of international relations theory. Realism has been the dominant strand.9

The second strand is the “liberal” or “Grotian tradition,” which tends to stress theimpact of domestic and international society, interdependence, and internationalinstitutions. In their simplest forms, liberal theories have been easily discredited.The proposition that gains from commercial transactions would overcome theproblems inherent in the security dilemma and make war too expensive was beliedin 1914. Hopes that a system of international law and organization could providecollective security to replace the need for self-help inherent in the security dilemmawere disappointed by 1939. Nonetheless, the sharp opposition between realist and

8Joseph S. Nye, Jr., “Nuclear Learning and U.S.–Soviet Security Regimes,” International Organization(Summer 1987).

9K. J. Holsti, The Dividing Discipline: Hegemony and Diversity in International Theory (Boston: Allen &Unwin, 1985).

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liberal theories is overstated. In fact, the two approaches can be complementary. So-phisticated versions of liberal theory address the way interactions among states andthe development of international norms can interact with domestic politics of statesin an international system to transform how those states define their interests.Transnational as well as interstate interactions and norms lead to new definitions ofinterests as well as new coalition possibilities for different interests within states.

Power and Interdependence sought to explain the patterns of change that weobserved during the early to mid-1970s by integrating aspects of the realist andliberal traditions. Thus our core argument in Chapter 1, that asymmetrical interde-pendence can be a source of power, links the liberal stress on interdependence withthe realist focus on power. Yet as we noted in our Preface to the first edition, wewere taught as students to see the world through “realist” glasses, and our bookreflected our struggle to see a more complex vision. Thus, realism bore the brunt ofour critique, and our quarrels with aspects of liberalism were subdued. As a result ofour rhetorical barbs at realism, our approach is sometimes labeled simply as“liberal.” Yet this characterization of Power and Interdependence is highly misleading,since we stressed the importance of governments’ wielding of power in pursuit oftheir conceptions of self-interest, and we declared in Chapter 1 that “military powerdominates economic power in the sense that economic means alone are likely to beineffective against the serious use of military force” (p. 16).

We have quite a bit to say, after more than a decade, both about how commen-tators construed or misconstrued our work, and about our own shifts in perspective.We could have changed the text of our book, but this would not have enabled us torespond to our critics, and it would have concealed our own amendments, shifts inpoint of view, and second thoughts. We could have written a long Preface—indeed,we drafted one—but our astute editor pointed out that this would encumber thereader unacquainted with our book with commentary before he or she had read theoriginal text. In this edition we have therefore left the original text as it was writtenand have added only a brief new Preface. We have, however, added an Afterword,which provides a fuller discussion of how we see our work, as contrasted with theperspective of commentators.10

In Chapter 8 of Power and Interdependence we drew some implications from ouranalysis for policy. In our view, many of our judgments remain valid—for instance,we argued that reducing the United States’ vulnerability to external shocks could bepart of a strategy of policy coordination and international leadership. Building anAmerican oil stockpile and taking the lead in the International Energy Agencyhave indeed been the two key components of the successful international energypolicy which has helped transform international energy politics since the 1970s.Furthermore, they have been, as we suggested, complementary, rather than alterna-tive, policies. We also argued for effective international policy coordination onecological issues—as lovers of wild lands we could not ignore this dimension of

10Most of the Afterword appeared as an article entitled “Power and Interdependence Revisited,” publishedin International Organization 42, no. 4 (Autumn 1987): 725–753.

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global politics—but suggested that cooperation on such issues would be difficult. Ingeneral, we called for “international surveillance and collective leadership” (p.232), which we still believe to be crucial if urgent world problems are to beaddressed.

These prescriptions, however valid, were mostly quite general. In 1985 wesought to make more specific recommendations, using not only the analysis ofPower and Interdependence but also that of subsequent work on internationalregimes. The article that we produced, “Two Cheers for Multilateralism,” isreprinted from Foreign Policy at the end of this volume, following the Afterword.

In the eleven years since we completed Power and Interdependence, our profes-sional paths have diverged and then converged again. Robert O. Keohane hasconcentrated on interpreting patterns of international cooperation and discord inlight of social science theory; Joseph S. Nye has served in government andpublished works on nuclear deterrence, ethics and international relations, andU.S.–Soviet relations. Since 1985 we have been colleagues at Harvard University,giving us the opportunity to discuss analytical and policy issues intensively again,both in seminars and in personal conversations. We have gained enormously fromour intellectual companionship and deeply satisfying personal friendship, whichnow extend over twenty years. If our readers also benefit, we will be doubly pleased.

Nearly three decades ago, we began working together on the ideas in this book. Wedid not seek to refute all of the “realist” arguments that we had been taught as grad-uate students or to formulate a wholly new “liberal” alternative to realism, althoughcareless readers and commentators have sometimes interpreted Power and Interde-pendence in this way. Instead, we sought to construct a way of looking at world poli-tics that helps us understand the relationships between economics and politics, andpatterns of institutionalized international cooperation, while retaining key realistinsights about the roles that power and interests play in world politics.

In the preface to the second edition, written at the end of the 1980s, we em-phasized our synthesis of liberal and realist perspectives on international relations.We also observed how theories of international relations are susceptible to the in-fluence of current events. We noted the revival of realism during the 1980s “littleCold War,” and how different the political climate was from that during the decadeduring which this book was written. Nevertheless, we argued that our perspectiveson interdependence were still relevant. The continuing relevance of our argumentsreflected the fact that we had not argued that everything was changing at once,nor did we propose universal generalizations, supposedly applicable everywhere andat all times. Instead, the argument of Power and Interdependence was explicitlyconditional. Under conditions of what we called “complex interdependence,”politics would be different than under realist conditions (Chapter 2). Since neithercomplex interdependence nor realist conditions are universal, understanding worldpolitics requires that one understand the conditions applicable among particularcountries at a particular time. The guiding theme of our work has been to combinethe great theoretical traditions of realism and liberalism in such a way as to clarifythe conditions under which the propositions of one tradition or the other are moreor less likely to be valid.

Today, at the beginning of a new millennium, everyone is talking about “global-ization” rather than “interdependence.” As we argue in Chapter 10, written for thisedition, globalization refers to an intensification of what we described as interde-pendence in 1977. Indeed, many aspects of world politics resemble the liberal por-trayal of the 1970s more than the realist image of the 1980s. In 1977 we identifiedthree characteristics of “complex interdependence”: multiple channels of contactamong society, lack of clear hierarchies of issues, and irrelevance of military force.We argued that although complex interdependence did not characterize most ofworld politics, it was coming to describe relations among the advanced industrial

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democracies, allied with the United States. Now democracy and open marketsspread more extensively over the globe, and the United States is more powerfulmilitarily, relative to its rivals, than ever before. Complex interdependence is notuniversal, but it seems to extend more widely than it did in 1977 or 1989.

Friends and anonymous referees polled by our publisher have told us that thebasic argument of our book remains relevant to the analysis of contemporary worldpolitics, even if some of the factual examples must be read in historical context. Wehave therefore produced this third edition, with two new chapters: Chapter 9 onhow the information revolution has affected power and interdependence, and along new Chapter 10 on globalization, written expressly for this edition. However,we have left the core of our book and our 1989 addenda untouched, except foreditorial changes to eliminate anachronisms such as references to the Soviet Unionin the present tense. To have changed these chapters in substantive ways wouldhave enabled us to “cover our tracks” where our statements might now seem to lackprescience. We prefer to retain what we wrote, “warts and all.” More important,changing the substance of our argument would have obscured one of the key reasonsto bring out a third edition: our contention that the analytical framework of Powerand Interdependence remains highly relevant for the understanding of globalizationat the beginning of the twenty-first century.

We sought in 1977 to understand how world politics was being affected by rapidtechnological change, then manifested by the telephone, television, and jet aircraft.We still seek to understand this interplay between technological change andpolitics, although now it is the “information revolution” and the Internet thatexemplify the most fundamental transformations in technology. The effects ofthe information revolution are already significant, as we discuss in Chapter 9.Nongovernmental actors can organize transnationally at very low transactionscosts, blurring the distinction between domestic and international politics. Individ-uals have unparalleled access to information, formerly confined within bureaucraticorganizations. As discussed in Chapter 10, globalization has created a number ofcomplex networks of relationships, which increase the possibilities for strategicinteraction, as well as generating great uncertainty. The information revolution isnot the sole cause of the current changes in international relations, but it hasgenerated significant effects as well as providing a catalyst for interactions betweenother causes, ranging from the collapse of the Soviet Union to thickening networksof international trade and investment.

The relevance of our analytical framework is, we believe, enhanced by the con-tinuing significance of the two main sets of forces that we tried to understand in1977: rapid technological change and the continuing importance of state interestsand power in shaping the global political economy. In the first edition we decriedthe oversimplified views of both “modernists” and “realists,” and we believe we wereright to do so. For instance, we showed the significance of economic interdepend-ence, but also that asymmetries in such interdependence provided a form of powerthat states could use in very traditional ways. The new chapters in this edition beginfrom the same analytical perspective as our 1977 work: that technological change,

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economics, and politics are closely connected but that none of these forces isdominant over the others. Our new Chapter 10, for example, emphasizes themultidimensionality of globalization—economic, environmental, military, andsocial. The analysis of Chapter 10 departs significantly from much contemporarywork on globalization—which exaggerates its economic component, overstates itsnewness, and sees it as technologically determined. But the argument of Chapter 10is broadly consistent with Chapters 1–8 of Power and Interdependence, writtenmostly in 1974–75 and published in 1977.

The consistency of our argument could be a fault as well as a virtue. Perhaps wehave failed to learn how wrong we were, or how much new has occurred. Readerswill have to judge this point for themselves. However, our consistency will be hardto deny. We objected in the 1970s, and object today, to formulations that saw asharp shift from geopolitics earlier to geoeconomics now—whether the “now” was1975 or 1999. All markets occur within a political framework, and to ignore the roleof military security in an era of peace and economic growth is like forgetting theimportance of oxygen to our breathing. It would be as much a mistake now as it wasin the 1970s to argue that a fundamental change from one overall model to anotherhas occurred. What we see is an interweaving of economic, environmental, military,and social relationships, rather than the replacement of one set by another.

In addition to the multidimensional perspective just identified, we have consis-tently seen world politics as differentiated both by issue areas and by region. Weresisted broad generalizations about interdependence in the 1970s, and aboutglobalization now, because we see so much variation among regions and acrossissues. Instead, we see the world as highly differentiated; hence our “issue structuremodel” of regime change, developed in Chapter 3, has proved more satisfactorythan an “overall power structure” explanation.

Our collaboration over thirty years has been a source of intellectual stimulationto both of us, which is difficult to express and would be impossible to overstate. Wehave different ways of looking at world politics—different degrees of induction anddeduction, varying orientations toward synthesis and criticism, different pers-pectives deriving from experiences as “insider” or “outsider.” Hence our thoughtprocesses do not duplicate one another. However, we also seem to “connect.” Whenone of us says something, the other often says—sometimes after substantial argu-ment—“Ah-ha! Now I see that problem differently, and more clearly.” We work andrework each other’s texts so thoroughly that it is usually difficult for us to identify,afterward, which of us had which ideas. We hope that our belief—that the result isbetter than either of us could accomplish alone—finds some resonance in the reac-tions of our readers.

Beyond intellectual stimulation, our collaboration has been a source of deepfriendship between us and between our families. The key ideas for the first editionwere discussed and elaborated in conversations between us in Joe Nye’s garden inLexington, Massachusetts; and our arguments for the new Chapters 9 and 10 wereworked out amidst the pristine hills of Sandwich, New Hampshire. Writing togetherhas been combined with the pleasure of tramping through the White Mountains,

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talking most of the way—through all but the steepest uphills and most treacherousdescents. We find that appreciation of the beauty of the natural environment,physical exercise, and the pleasure of friendship all enhance the quality of thought.

As with the first edition, we have some debts to acknowledge. Neal Rosendorfwas an indispensable research specialist, keeping a busy dean from getting boggeddown in searches for the right citation. Sarah Brooks, William Clark, Gary Gereffi,Stephen D. Krasher, Enrique Mendoza, and Justin Pearlman provided valuablewritten comments on an earlier draft, as did many members of the Visions ofGovernance Study Group at the Kennedy School. We acknowledge with thanksthose individuals who reviewed the entire manuscript: Vinod K. Aggarwal,University of California–Berkeley; R. Kurt Burch, University of Delaware; WilliamO. Chittick, University of Georgia; Joseph Lepgold, Georgetown University; andKendall Stiles, Loyola University of Chicago. Many other friends, students, andcolleagues offered suggestions, some of them in seminars that the authors gave atboth Duke and Harvard. Most of all, we give thanks to, and for, Nannerl OverholserKeohane and Molly Harding Nye. In 1977 we wrote that their contributions “wouldrequire another book, not a mere preface, to recount.” How much more is that true,twenty-three happy and productive years later!

POWER AND INTERDEPENDENCE IN THE TWENTY-FIRST CENTURY

Power and Interdependence has had a remarkably long life for a book on internationalrelations. Not only is this the fourth edition, over a period of 34 years, but the bookcontinued to be cited frequently during the first decade of the twenty-first century. Asampling of 105 citations from Google Scholar (which lists over 2,500 cites to Powerand Interdependence) yielded 63 citations—60 percent—from the last decade, begin-ning in 2000, as opposed to 28 (27 percent) from the 1990s and 14 (13 percent) from1989 and earlier. In part, this may reflect the interaction between theorists andevents in the volatile world of world politics. Shortly after this book was published in1977, the Cold War thaw called “détente” was disrupted by the Soviet invasion ofAfghanistan and a revival of the nuclear arms race. Many theorists reacted to ourwork as “interesting, but not very relevant.” When the world changed in the 1980s,veering toward our ideal type of complex interdependence (although not fully tothat ideal type), Power and Interdependence seemed more relevant to some students ofinternational relations than it had seemed shortly after its publication.

Thus the continuing relevance of our analysis is surely not due to our workalone, but also to the way the world has changed. We set out to answer two majorquestions: (l) “What are the major features of world politics when interdependence,particularly economic interdependence, is extensive,” and (2) “how and why dointernational regimes change” (p. 5). In answering these questions, we elaborated aconcept of asymmetrical interdependence as a means of exercising power. Thatapproach was consistent with the reigning realist paradigm, but it extended theanalysis of power to areas beyond military security that had received little attention.We also posited an ideal type of international relations that we called “complexinterdependence” in which we reversed three realist assumptions that (1) states arethe only significant actors, (2) security is the dominant goal, and (3) force is thedominant instrument. We then speculated about how struggles for power––who getswhat, when, and how––would be conducted under such imaginary conditions. Wealso sketched four causal models of how regimes that governed international issuesmight change: an economic model, a model based on the overall structure of power,a model based on the distribution of power within the issue area, and an interna-tional organization model. The continued relevance of this book can be accountedfor in large part by the fact that what is now called “globalization” has brought the

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world closer to complex interdependence on certain issues––for example, climatechange and financial markets––and in certain parts of the world––for example,relations among the advanced democracies. At the same time, we recognized acontinuing role of force, and how it would interact with economic interdepend-ence. For example, we wrote that “both the difficulty of controlling sociallymobilized populations with foreign troops and the changing technology ofweaponry may actually enhance the ability of certain countries, or non-state groups,to use terrorism as a political weapon without effective fear of reprisal” (p. 29).The end of the Cold War, the increase of globalization, and the information revolu-tion that has lowered the costs of entry for nonstate actors and crowded theinternational stage with transnational actors have made the analysis more relevantthan it was in 1977. What seemed fanciful then, seems commonplace today.

Yet relevance does not ensure validity: Power and Interdependence could remainrelevant, due to its subject matter, but still be highly misleading about contempo-rary world politics. While it will take a longer passage of time to be sure, at thispoint it seems to us that the three most salient events since the publication of thefirst edition that present challenges to the validity of our argument are the end ofthe Cold War in 1989–1991; the terrorist attacks of 9/11/01, and reactions to them;and the global financial crisis of 2008. What are their implications for the value, orlimitations, of the approach taken in Power and Interdependence?

In evaluating these challenges, it is important to recognize the limitations of ouranalysis that we acknowledged from the start. Power and Interdependence sought to pro-vide a framework for using international factors to explain change and stability in worldpolitics. In the preface to the first edition, we acknowledged that no such explanation,which left out domestic politics, could be complete, but we argued that “the complexrelations between foreign and domestic policy make it essential to know how muchone can explain purely on the basis of information about the international system.” Inour Afterword to the second edition, published in 1987, we repeated that “any system-level analysis will necessarily be incomplete” (p. 283). The other major limitation ofthe analysis in Power and Interdependence is most relevant to issues involving complexinterdependence, in which multiple channels connect societies, multiple issues arisethat are not arranged hierarchically, and in which military force is not used by govern-ments. So there would be little reason to believe that our book could contribute muchto a full understanding of relations between the United States and North Korea today,any more than to a full understanding in 1977 to relations between the United Statesand the Soviet Union where nuclear weapons were a central issue.

Power and Interdependence never purported to make predictions about the futureor to provide a methodology for doing so. Instead, it was designed to provide con-cepts that would help observers of world politics to understand and interpret whatthey saw, so that they could fit it into some general patterns and not be surprised bydevelopments that would indeed surprise those with the statist-security frameworkpreviously put forward by “realist” political theory. The test of the validity of thisframework, therefore, is not whether it predicted these events or would have led itspractitioners to do so (it did not), but whether it helps us understand their ramifica-tions: the “shock waves,” so to speak, that reverberated after the events.

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THE END OF THE COLD WAR, 1989–1991

While some analysts predicted the eventual end of the Cold War, almost none wereright about the timing, and many were wrong about the aftermath. As with mostmajor events in world politics, an adequate explanation is required at the systemic,domestic, and even individual levels. Structural realist theories (“neo-realism”)fared particularly badly with their focus on the stability of bipolarity in the distribu-tion of military power at the systemic level, and their expectations that after theCold War states would engage in shifting alliances in a struggle to balance power inCentral Europe. Unlike the aftermath of the two world wars, Central Europebecame an area of stability after the Cold War. Power and Interdependence didno better in predicting the end of the Cold War, but the concepts of complex interdependence and the attention to multiple channels of contact and insti-tutionalized regimes, such as NATO and the European Union, would have helpedobservers to avoid expecting that the aftermath would mimic nineteenth- and earlytwentieth-century politics.

The timing of the end of the Cold War owed much to one man and to domesticpolitics within the Soviet Union. Mikhail Gorbachev wanted to reform commu-nism, not replace it. However, his reform snowballed into a revolution driven frombelow rather than controlled from above. When he first came to power in 1985,Gorbachev tried to discipline the Soviet people as a way to overcome the existingeconomic stagnation. When discipline was not enough to solve the problem, helaunched the idea of perestroika, or “restructuring,” but the bureaucrats kept thwart-ing his orders. To light a fire under the bureaucrats, he used a strategy of glasnost, oropen discussion and democratization. But once glasnost let people say what theywere thinking, many people said, “We want out.” By December 1991, the SovietUnion ceased to exist.

Some of these events stemmed from Gorbachev’s miscalculations. He thoughtthat communism could be repaired, but in fact, in trying to repair it, he punched ahole in it. And like a hole in a dam, once the pent-up pressures began to escape, theyrapidly increased the opening and tore apart the system. If the members of theCommunist Party Politburo had chosen one of Gorbachev’s hard-line competitors in1985, it is quite plausible that the declining Soviet Union could have held on foranother decade or so. It did not have to collapse quite so quickly. Gorbachev’stinkering contributed greatly to the timing.

But there were also deeper causes. One was the soft or attractive power of liberalideas. The growth of transnational communications and contacts helped spread lib-eral ideas, and the demonstration effect of Western economic success gave them addi-tional appeal. In addition, the enormous Soviet defense budget began to affect otheraspects of Soviet society. Health care declined and the mortality rate in the SovietUnion increased (the only developed country where that occurred). Eventually eventhe military became aware of the tremendous burden caused by imperial overstretch.

Ultimately the deepest causes of Soviet collapse were the decline of communistideology and the failure of the Soviet economy. This would have happened evenwithout Gorbachev. In the early Cold War, communism and the Soviet Union had

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a good deal of soft power. Many communists had led the resistance against fascismin Europe, and many people believed that communism was the wave of the future.But Soviet soft power was undercut by the de-Stalinization in 1956 that exposed hiscrimes, by the repressions in Hungary in 1956, in Czechoslovakia in 1968 and inPoland in 1981, and by the growing transnational communication of liberal ideas.Although in theory communism aimed to instill a system of class justice, Lenin’sheirs maintained domestic power through a brutal state security system involvinglethal purges, gulags, broad censorship, and the use of informants. The net effect ofthese repressive measures was a general loss of faith in the system.

Behind this lay the diminished ability of the Soviet central planning system torespond to change in the global economy. Stalin had created a system of centralizedeconomic direction that emphasized heavy metal and smokestack industries, andisolation from the global economy. It was very inflexible—all thumbs and nofingers. As Joseph Schumpeter pointed out, capitalism is creative destruction, a wayof responding flexibly to major waves of technological change. At the end of thetwentieth century, the major technological change of the third industrial revolutionwas the growing role of information as the scarcest resource in an economy. TheSoviet system was particularly inept at handling information. The deep secrecy ofits political system meant that the flow of information was slow and cumbersome.

Economic globalization created turmoil in the world economy at the end of thetwentieth century, but the Western economies, using market systems, were able totransfer labor to services, to reorganize their heavy industries, and to switch to com-puters. The Soviet Union could not keep up. For instance, when Gorbachev cameto power in 1985, there were 50,000 personal computers in the Soviet Union; in theUnited States there were 30 million. Four years later, there were about 400,000personal computers in the Soviet Union, and 40 million in the United States.According to one Soviet economist, by the late 1980s, only 8 percent of Sovietindustry was competitive at world standards. It is difficult to remain a superpowerwhen 92 percent of industry is not competitive. Soviet efforts to isolate and protecttheir industries and to selectively import technology were no match for the multiplechannels among market economies. Readers of Power and Interdependence would nothave been any better off in terms of understanding the timing of the end of the ColdWar, but the concepts of complex interdependence might have helped them betterto understand part of the causes, and the focus on regimes and institutions mighthave helped them to some of the consequences in Central Europe.

POWER, ASYMMETRICAL INTERDEPENDENCE, AND 9/11

The terrorist acts of 9/11 showed, in the terms used in Power and Interdependence,that networks of interdependence, involving transmission of informal violence,have now taken a genuinely global form. We refer to this development as “the glob-alization of informal violence.” Power and Interdependence helps us to see such glob-alization in terms of its analysis of interdependence and power. Interdependence isconceptualized as mutual dependence, and power is conceptualized in terms of

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asymmetrical interdependence. Power and Interdependence makes it clear that “militarypower dominates economic power in the sense that economic means alone arelikely to be ineffective against the serious use of military force” (Keohane and Nye2001: 14). Hence a reader of our book would not have been surprised that the reac-tion of the United States to 9/11 was principally military rather than economic, orthat that reaction reshaped America’s foreign relations.

September 11 revealed how much the United States could be hurt by informalviolence, to an extent that had been anticipated by some government reports butthat had not been incorporated into the plans of the government. Perceptions ofthe long-term vulnerability of the United States to terrorism from the outside wereelevated by the events of 9/11 and subsequent terrorism in Europe and Asia.

If the United States were facing a territorial state with conventional objec-tives, this vulnerability might not be a source of worry. After all, the UnitedStates has long been much more vulnerable, in technological terms, to a nuclearattack from Russia. But the United States was not asymmetrically vulnerable. Onthe contrary, the United States either had superior nuclear capability or “mutualassured destruction” (MAD) kept vulnerability more or less symmetrical. Russiahas controlled great force, but has not acquired power over the United States fromits arsenal.

With respect to terrorism, however, three asymmetries, which do not alwayscharacterize relationships between states, favored wielders of informal violence inSeptember 2001. First, there was an asymmetry of information. It seems paradoxicalthat an “information society” such as that of the contemporary United States wouldbe at an informational disadvantage with respect to networks of individuals whosecommunications seem to occur largely through handwritten messages and face-to-face contacts. But an information society is also an open society. Potential terroristshad good information about their targets, while before September 11 the UnitedStates had poor information about the identity and location of terrorist networkswithin the United States and other Western societies. Second, there was an asymme-try in attention. A larger actor has multiple issues and objectives which often diluteits attention to a smaller actor. The smaller actor can devote its attention and focusits will more easily. (This can benefit states as well as nonstate actors, as we showedin our chapter on Canada–U.S. relations.) The net result was that there was a gooddeal of information about al-Qaeda in the American intelligence system, but theUnited States was unable to process coherently the information that its variousagencies had gathered. Third, there is an asymmetry in beliefs.

Some of Osama bin Laden’s followers apparently believed that they would berewarded in the afterlife for committing suicidal attacks on civilians. Clearly, thesuicidal nature of the attacks made them more difficult to prevent and magnifiedtheir potential destructive power. Neither volunteering for suicide missions nordeliberately targeting civilians was consistent with beliefs widely shared in the societiesattacked by al-Qaeda.

The United States and its allies have enormous advantages in resources,including military power, economic resources, political influence, and technologicalcapabilities. Furthermore, communications media, largely based in the West, give

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greater weight to the voices of people in the wealthy democracies than to those of thedispossessed in developing countries. Hence the asymmetries in information, atten-tion, and beliefs that we have mentioned do not confer a permanent advantage on thewielders of informal violence. Traditionally, analysts assumed that victory went to theside with the better army; in an information age it may also be influenced by who hasthe better story. Competing narratives matter. Indeed, a sober analysis of the asymme-tries of power between the United States and al-Qaeda in late 2001 would have madeit clear that many of these asymmetries favored the United States. As we say (p. 14),“strategies of manipulating interdependence are likely to lead to counter-strategies.” Itis interesting that one of the dominant trends of modern military strategy focuses onasymmetrical warfare, including the narratives that affect hearts and minds.

Yet as Power and Interdependence emphasized, it is essential to disaggregatesources of power. One of the faults of conventional analysis before 9/11 was thefailure to understand that the most powerful state ever to exist on this planet couldbe vulnerable to small bands of terrorists due to patterns of asymmetrical inter-dependence. As warned by Power and Interdependence, conventional thinking hasoveremphasized states and has overaggregated power.

Power comes not simply out of the barrel of a gun, but from asymmetries invulnerability interdependence and from the comparative attractiveness of com-peting narratives––some of which, it turns out, favor certain nonstate actors morethan most observers anticipated. The networks of interdependence along whichpower can travel are multiple, and they do not cancel one another out. Even a statethat is overwhelmingly powerful on many dimensions can be highly vulnerable onothers. We learned this lesson in the 1970s with respect to oil power but we had torelearn it with respect to terrorism. We will face it increasingly as competitionbetween states and nonstate actors moves into the cyber domain.

COMPLEX INTERDEPENDENCE AND THE FINANCIALCRISIS OF 2008

In Chapter 2 of Power and Interdependence we emphasized that the role of trans-national actors makes it more difficult for leaders of states to “calculate the mani-pulation of interdependence” (p. 29). Furthermore, transgovernmental ties amongsubunits of government, we argued, make the content of the “national interest”ambiguous (p. 30). Constant contact among financial overseers helped create bank-ing regulations centered in the Basle-based Bank for International Settlements, buta common financial worldview created a system that was attuned to financialinterests and not adequately robust in the face of changes wrought by transnationalfinancial actors and flows.

These descriptive observations seem to retain their validity when we look atthe financial crisis of 2008. The systemic risks implied by the complex financial de-rivatives that were developed by banks, and the elaborate insurance arrangementsengaged in by firms such as AIG, were not well understood either by the banks andother parties themselves, or by governments. Furthermore, it was apparent during

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the crisis that different branches of the same governments had different views:central bankers did not always see eye-to-eye with treasury departments; Congressdefeated the first attempted bank bailout in the United States; and in the aftermathof the crisis U.S. regulatory agencies have been sharply in conflict over the properdistribution of future authority. One could properly observe that when we spoke of“complex interdependence” in 1977 we had no idea what complexity really was!

In Chapter 3 we went beyond description and sought to explain changes ininternational regimes on the basis of shifts in underlying structures of power and thebargaining processes that they generate. Our view was that major changes in inter-national monetary regimes––such as the collapse of the gold standard in 1931 andof the Bretton Woods system in 1971–1973––were largely accounted for by changesin what we called the “issue-structure”: the distribution of power resources withinthe issue area. As we said, “the issue structure model helps us understand the col-lapse of the monetary regime in 1931 and makes a major contribution to explainingthe breakdown of the Bretton Woods system in 1971” (p. 121).

This argument suggests that beneath the surface, described by journalisticaccounts of the financial crisis of 2008, we should look for shifts in the tectonicplates of issue structure. The obvious candidate is the rise of China to economic pro-minence, and particularly the fact that it has amassed over $2 trillion of foreignexchange reserves, mostly held in U.S. Treasury securities. Some observers havedescribed this as a great shift in the global balance of power in which China couldbring the United States to its knees by threatening to sell its dollars. But in doingso, China would not only reduce the value of its reserves as the price of the dollarfell, but it would also jeopardize American willingness to continue to import cheapChinese goods which would mean job loss and instability in China. If it dumped itsdollars, China would bring the United States to its knees but might bring itself to itsankles. Power and Interdependence would suggest looking at the balance of asymmet-rical interdependence, not just at one side of the equation. As other analysts havesuggested, the symmetry resembles a “balance of financial terror” analogous to thebalance of nuclear terror in which the United States and the Soviet Union coulddestroy each other in a nuclear exchange but did not.

Nonetheless, our issue structural and international organization models ofregime change would suggest that countries would try to change the framework toreduce their vulnerabilities. The United States has been pressing China to let itscurrency float upward as a means of reducing the American trade deficit and thedollar imbalance. At the same time, China’s central bank officials began makingstatements about the American need to increase its savings, reduce it externaldeficit, and move toward a long-term future in which the dollar would be supple-mented by IMF-issued special drawing rights as a reserve currency. But China wasnot willing to take the risks of making its yuan convertible for domestic politicalreasons. Thus the yuan is unlikely soon to challenge the dollar’s role as the largestcomponent of world reserves (over 60 percent).

What our two models suggest is a gradual increase in Chinese influence ininternational fora, as well as greater influence for other emerging economies. Thusit was not surprising to see the G-7 forum (where four of the seven economies were

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European) supplemented by a G-20 summit which includes economies representing80 percent of world product. In the run-up to the G-20 meeting in Pittsburgh inSeptember 2009, there was much discussion of the need to “re-balance” financialflows, altering the old pattern of U.S. deficits matching Chinese surpluses. Suchalterations, of course, would require profound, and politically wrenching, shifts ininternal patterns of consumption and investment in both countries. One would notexpect such changes to occur quickly, but it is interesting to note that the G-20 hasagreed that Europe should reduce the weight of its votes in the IMF and China andother emerging economies should gradually increase their weight.

Mentioning these essential adjustments reinforces the point made earlier aboutthe incompleteness of the analysis in Power and Interdependence: domestic politics isimportant at every point, and may lie behind the structural conditions, and shifts,on which international-level analysts focus. Furthermore, it is too early to tellwhether 2008 marks a fundamental break, such as occurred in 1931; a significantbut only partial shift, as in 1971–1973; or merely another crisis-driven set of adjust-ments that do not affect fundamental structures, as was the case with the1998–1999 Asian financial crisis.

One of the difficulties in evaluating the validity of the analysis in Power andInterdependence is that it is highly qualified, hence difficult to falsify. In the 1987Afterword, for instance, we argue for the importance of learning (p. 286). Andthere is good reason to believe that the avoidance of another Great Depression in2008–2009 was indeed due to learning by policy-makers of the Keynesian lessons ofthat era. The major powers, including the United States, China, and most Asianand European countries, engaged in enormous fiscal stimulus, coupled by very laxmonetary policies, during the fall of 2008 and the winter of 2009—arguably helpingby these measures to moderate the recession and bring it to an end in most countriesby the end of the year.

CONCLUSION

Looking at what we now consider to be the candidates for the three most significantevents in world politics since the publication of Power and Interdependence in 1977,we are struck by how much the world has come to resemble the ideal type ofcomplex interdependence that we hypothesized, and which was widely regarded asfanciful at the time. We are also struck by the ways in which our analysis of differenttypes of asymmetries can illuminate the power relationships that accompanyinterdependence, and the continued relevance of our models of regime change.However, we are equally struck by a sense of humility about how much the worldhas changed, how little we foresaw, and how much change lies ahead.

ROBERT O. KEOHANE

JOSEPH S. NYE

� CHAPTER 1 INTERDEPENDENCE IN WORLD POLITICSThe New Rhetoric of InterdependenceInterdependence as an Analytic ConceptPower and InterdependenceInternational Regime Change

� CHAPTER 2 REALISM AND COMPLEX INTERDEPENDENCEThe Characteristics of Complex InterdependenceThe Political Processes of Complex Interdependence

� CHAPTER 3 EXPLAINING INTERNATIONAL REGIME CHANGEAn Economic Process ExplanationOverall Power Structure ExplanationIssue StructureAn International Organization ModelCombining Explanations

UnderstandingInterdependence

IPART

1


3

We live in an era of interdependence. This vague phrase expresses a poorly understoodbut widespread feeling that the very nature of world politics is changing. The power ofnations—that age-old touchstone of analysts and statesmen—has become moreelusive: “calculations of power are even more delicate and deceptive than in previousages.”1 Henry Kissinger, though deeply rooted in the classical tradition, has stated that“the traditional agenda of international affairs—the balance among major powers, thesecurity of nations—no longer defines our perils or our possibilities. . . . Now we areentering a new era. Old international patterns are crumbling; old slogans are unin-structive; old solutions are unavailing. The world has become interdependent ineconomics, in communications, in human aspirations.”2

How profound are the changes? A modernist school sees telecommunicationsand jet travel as creating a “global village” and believes that burgeoning social andeconomic transactions are creating a “world without borders.”3 To a greater orlesser extent, a number of scholars see our era as one in which the territorial actorssuch as multinational corporations, transnational social movements, and interna-tional organizations. As one economist put it, “the state is about through as aneconomic unit.”4

Traditionalists call these assertions unfounded “globaloney.” They point to thecontinuity in world politics. Military interdependence has always existed, and mili-tary power is still important in world politics—witness nuclear deterrence; theVietnam, Middle East, and India-Pakistan wars; and China’s military threats towardTaiwan or American intervention in the Caribbean. Moreover, as the SovietUnion has showed, authoritarian states could, at least until recently, controltelecommunications and social transactions that they considered disruptive. Evenpoor and weak countries have been able to nationalize multinational corporations,and the prevalence of nationalism casts doubt on the proposition that the nation-state is fading away.

Interdependence in World Politics

1CHAPTER

4 Chapter 1 Interdependence in World Politics

Neither the modernists nor the traditionalists have an adequate framework forunderstanding the politics of global interdependence.5 Modernists point correctly tothe fundamental changes now taking place, but they often assume without sufficientanalysis that advances in technology and increases in social and economic transactionswill lead to a new world in which states, and their control of force, will no longer beimportant.6 Traditionalists are adept at showing flaws in the modernist vision by point-ing out how military interdependence continues, but find it very difficult to interpretaccurately today’s multidimensional economic, social, and ecological interdependence.

Our task in this book is not to argue either the modernist or traditionalist posi-tion. Because our era is marked by both continuity and change, this would be fruit-less. Rather, our task is to provide a means of distilling and blending the wisdom inboth positions by developing a coherent theoretical framework for the politicalanalysis of interdependence. We shall develop several different but potentially com-plementary models, or intellectual tools, for grasping the reality of interdependencein contemporary world politics. Equally important, we shall attempt to explore theconditions under which each model will be most likely to produce accurate predic-tions and satisfactory explanations. Contemporary world politics is not a seamlessweb; it is a tapestry of diverse relationships. In such a world, one model cannotexplain all situations. The secret of understanding lies in knowing which approachor combination of approaches to use in analyzing a situation. There will never be asubstitute for careful analysis of actual situations.

Yet theory is inescapable; all empirical or practical analysis rests on it. Pragmaticpolicymakers might think they need pay no more heed to theoretical disputes overthe nature of the world than they pay to medieval scholastic disputes over howmany angels can dance on the head of a pin. Academic pens, however, leave marksin the minds of statesmen with profound results for policy. Not only are “practicalmen who believe themselves to be quite exempt from any intellectual influences”unconscious captives of conceptions created by “some academic scribbler of a fewyears back,” but increasingly the scribblers have been playing a direct role in form-ing foreign policy.7 Inappropriate images and ill-conceived perceptions of world pol-itics can lead directly to inappropriate or even disastrous national policies.

Rationale and rationalization, systemic presentation and symbolism, become sointertwined that it is difficult, even for policymakers themselves, to disentangle real-ity from rhetoric. Traditionally, classical theories of world politics have portrayed apotential “state of war” in which states’ behavior was dominated by the constantdanger of military conflict. During the Cold War, especially the first decade afterWorld War II, this conception, labeled “political realism” by its proponents, becamewidely accepted by students and practitioners of international relations in Europeand the United States.8 During the 1960s, many otherwise keen observers whoaccepted realist approaches were slow to perceive the development of new issuesthat did not center on military-security concerns.* The same dominant image in the

*In The Troubled Partnership (New York: McGraw-Hill for the Council of Foreign Relations, 1965) HenryA. Kissinger discussed alliance problems with hardly a reference to economic issues, although economic issueswere beginning seriously to divide the NATO allies.

The New Rhetoric of Interdependence 5

late 1970s or 1980s would be likely to lead to even more unrealistic expectations.Yet to exchange it for an equally simple view—for instance, that military force isobsolete and economic interdependence benign—would condemn one to equallygrave, though different, errors.

What are the major features of world politics when interdependence, particu-larly economic interdependence, is extensive?9 This is one of the two major ques-tions we address in this book. In Chapter 2 we explore this question in generalterms; in Chapter 5 and part of Chapter 7 we investigate it further in four case studies;and Chapter 8 examines the implications for American foreign policy. To lay thegroundwork for these analyses, in the rest of this chapter we define what we mean byinterdependence, differentiate its major types, and relate them to the concept ofpower, which remains fundamental to the analysis of world politics.

Interdependence affects world politics and the behavior of states; but govern-mental actions also influence patterns of interdependence. By creating or acceptingprocedures, rules, or institutions for certain kinds of activity, governments regulateand control transnational and interstate relations. We refer to these governingarrangements as international regimes. The second major question of this book is,How and why do international regimes change? Chapter 3 develops a set of expla-nations for the development of international regimes, and their eventual decline. InChapter 6 we apply these explanations to issues of oceans and money, and inChapter 7 we use them to understand some features of Canadian-American andAustralian-American relationships.

But interdependence is not simply an analytical concept. It is also a rhetoricaldevice employed by publicists and statesmen. For the statesman, eager to increasethe number of people marching beneath his banner, vague words with broad appealare useful. For the analyst, such vagueness is the path to a swamp of confusion.Before we can construct usable concepts, much less increase our understanding ofinterdependence and regime change, we must clear a way through the rhetoricaljungle. Our task is to analyze the politics of interdependence, not to celebrate it.

THE NEW RHETORIC OF INTERDEPENDENCE

During the Cold War, “national security” was a slogan American political leadersused to generate support for their policies. The rhetoric of national security justi-fied strategies designed, at considerable cost, to bolster the economic, military, andpolitical structure of the “free world.” It also provided a rationale for internationalcooperation and support for the United Nations, as well as justifications foralliances, foreign aid, and extensive military involvements.

National security became the favorite symbol of the internationalists whofavored increased American involvement in world affairs. The key foreign policycoordinating unit in the White House was named the National Security Council.The Truman administration used the alleged Soviet threat to American security topush the loan to the British and then the Marshall Plan through Congress. TheKennedy administration employed the security argument to promote the 1962 Trade


Expansion Act. Presidents invoked national security to control certain sectoral eco-nomic interests in Congress, particularly those favoring protectionist trade policies.Congressmen who protested adverse economic effects on their districts or increasedtaxes were assured—and in turn explained to constituents—that the “national secu-rity interest” required their sacrifice. At the same time, special interests frequentlymanipulated the symbolism of national security for their own purposes, as in thecase of petroleum import quotas, promoted particularly by domestic oil producersand their political allies.10

National security symbolism was largely a product of the Cold War and thesevere threat Americans then felt. Its persuasiveness was increased by realist analy-sis, which insisted that national security is the primary national goal and that ininternational politics security threats are permanent. National security symbolism,and the realist mode of analysis that supported it, not only epitomized a certain wayof reacting to events, but helped to codify a perspective in which some changes, par-ticularly those toward radical regimes in Third World countries, seemed inimical tonational security, while fundamental changes in the economic relations amongadvanced industrialized countries seemed insignificant.

As the Cold War sense of security threat slackened, foreign economic competi-tion and domestic distributional conflict increased. The intellectual ambiguity of“national security” became more pronounced as varied and often contradictoryforms of involvement took shelter under a single rhetorical umbrella.11 In hisimagery of a world balance of power among five major centers (the United States,the Soviet Union, China, Europe, Japan), President Nixon tried unsuccessfully toextend traditional realist concepts to apply to the economic challenge posed byAmerica’s postwar allies, as well as the political and military actions of the SovietUnion and China.

As the descriptive accuracy of a view of national security dominated by militaryconcerns declined, so did the term’s symbolic power. This decline reflected not onlythe increased ambiguity of the concept, but also American reaction to the Vietnamimbroglio, to the less hostile relationship with Russia and China summed up by theword detente, and to the misuse of national security rhetoric by President Nixon inthe Watergate affair. National security had to share its position as the prime symbolin the internationalists’ lexicon with interdependence.

Political leaders often use interdependence rhetoric to portray interdependenceas a natural necessity, as a fact to which policy (and domestic interest groups) mustadjust, rather than as a situation partially created by policy itself. They usually arguethat conflicts of interest are reduced by interdependence, and that cooperationalone holds the answer to world problems.

“We are all engaged in a common enterprise. No nation or group of nations cangain by pushing beyond the limits that sustain world economic growth. No one ben-efits from basing progress on tests of strength.”12 These words clearly belong to astatesman intending to limit demands from the Third World and influence publicattitudes at home, rather than to analyze contemporary reality. For those who wishthe United States to retain world leadership, interdependence has become part ofthe new rhetoric, to be used against both economic nationalism at home and

Interdependence as an Analytic Concept 7

assertive challenges abroad. Although the connotations of interdependence rhetoricmay seem quite different from those of national security symbolism each has oftenbeen used to legitimize American presidential leadership in world affairs.

Yet interdependence rhetoric and national security symbolism coexist onlyuneasily. In its extreme formulation, the former suggests that conflicts of interest arepassé, whereas the latter argues that they are, and will remain, fundamental, andpotentially violent. The confusion in knowing what analytical models to apply toworld politics (as we noted earlier) is thus paralleled by confusion about the policiesthat should be employed by the United States. Neither interdependence rhetoricnor national security symbolism provides reliable guidelines for problems of exten-sive interdependence.

Rhetoricians of interdependence often claim that since the survival of thehuman race is threatened by environmental as well as military dangers, conflicts ofinterest among states and peoples no longer exist. This conclusion would only fol-low if three conditions were met: an international economic system on which every-one depended on our basic life-supporting ecological system were in danger; allcountries were significantly vulnerable to such a catastrophe; and there were onlyone solution to the problem (leaving no room for conflict about how to solve it andwho should bear the costs). Obviously these conditions are rarely all present.

Yet balance of power theories and national security imagery are also poorlyadapted to analyzing problems of economic or ecological interdependence. Security,in traditional terms, is not likely to be the principal issue facing governments.Insofar as military force is ineffective on certain issues, the conventional notion ofpower lacks precision. In particular, different power resources may be needed to dealwith different issues. Finally, in the politics of interdependence, domestic andtransnational as well as governmental interests are involved. Domestic and foreignpolicy become closely linked. The notion of national interest—the traditionalists’lodestar—becomes increasingly difficult to use effectively. Traditional maxims ofinternational politics—that states will act in their national interests or that theywill attempt to maximize their power—become ambiguous.

We are not suggesting that international conflict disappears when interdepend-ence prevails. On the contrary, conflict will take new forms, and may even increase.But the traditional approaches to understanding conflict in world politics will notexplain interdependence conflict particularly well. Applying the wrong image andthe wrong rhetoric to problems will lead to erroneous analysis and bad policy.

INTERDEPENDENCE AS AN ANALYTIC CONCEPT

In common parlance, dependence means a state of being determined or significantlyaffected by external forces. Interdependence, most simply defined, means mutualdependence. Interdependence in world politics refers to situations characterized byreciprocal effects among countries or among actors in different countries.

These effects often result from international transactions—flows of money,goods, people, and messages across international boundaries. Such transactions have


increased dramatically since World War II: “Recent decades reveal a general ten-dency for many forms of human interconnectedness across national boundaries to bedoubling every ten years.”13 Yet this interconnectedness is not the same as interde-pendence. The effects of transactions on interdependence will depend on the con-straints, or costs, associated with them. A country that imports all of its oil is likelyto be more dependent on a continual flow of petroleum than a country importingfurs, jewelry, and perfume (even of equivalent monetary value) will be on uninter-rupted access to these luxury goods. Where there are reciprocal (although not nec-essarily symmetrical) costly effects of transactions, there is interdependence. Whereinteractions do not have significant costly effects, there is simply interconnected-ness. The distinction is vital if we are to understand the politics of interdependence.

Costly effects may be imposed directly and intentionally by another actor—asin Soviet-American strategic interdependence, which derived from the mutualthreat of nuclear destruction. But some costly effects do not come directly or inten-tionally from other sectors. For example, collective action may be necessary to pre-vent disaster for an alliance (the members of which are interdependent), for aninternational economic system (which may face chaos because of the absence ofcoordination, rather than through the malevolence of any actor), or for an ecologi-cal system threatened by a gradual increase of industrial effluents.

We do not limit the term interdependence to situations of mutual benefit. Such adefinition would assume that the concept is only useful analytically where the mod-ernist view of the world prevails: where threats of military force are few and levels ofconflict low. It would exclude from interdependence cases of mutual dependence,such as the former strategic interdependence between the United States and theSoviet Union. Furthermore, it would make it very ambiguous whether relationsbetween industrialized countries and less developed countries should be consideredinterdependent or not. Their inclusion would depend on an inherently subjectivejudgment about whether the relationships were “mutually beneficial.”

Because we wish to avoid sterile arguments about whether a given set of rela-tionships is characterized by interdependence or not, and because we seek to use theconcept of interdependence to integrate rather than further to divide modernist andtraditional approaches, we choose a broader definition. Our perspective implies thatinterdependent relationships will always involve costs, since interdependencerestricts autonomy; but it is impossible to specify a priori whether the benefits of arelationship will exceed the costs. This will depend on the values of the actors aswell as on the nature of the relationship. Nothing guarantees that relationships thatwe designate as “interdependent” will be characterized by mutual benefit.

Two different perspectives can be adopted for analyzing the costs and benefits ofan interdependent relationship. The first focuses on the joint gains or joint losses tothe parties involved. The other stresses relative gains and distributional issues.Classical economists adopted the first approach in formulating their powerful insightabout comparative advantage: that undistorted international trade will provide over-all net benefits. Unfortunately, an exclusive focus on joint gain may obscure the sec-ond key issue: how those gains are divided. Many of the crucial political issues ofinterdependence revolve around the old question of politics, “who gets what?”

Power and Interdependence 9

It is important to guard against the assumption that measures that increasejoint gain from a relationship will somehow be free of distributional conflict.Governments and nongovernmental organizations will strive to increase theirshares of gains from transactions, even when they both profit enormously from therelationship. Oil-exporting governments and multinational oil companies, forinstance, share an interest in high prices for petroleum; but they have also been inconflict over shares of the profits involved.

We must therefore be cautious about the prospect that rising interdependence iscreating a brave new world of cooperation to replace the bad old world of interna-tional conflict. As every parent of small children knows, baking a larger pie does notstop disputes over the size of the slices. An optimistic approach would overlook theuses of economic and even ecological interdependence in competitive internationalpolitics.

The difference between traditional international politics and the politics of eco-nomic and ecological interdependence is not the difference between a world of“zero-sum” (where one side’s gain is the other side’s loss) and “non-zero sum” games.Military interdependence need not be zero-sum. Indeed, military allies actively seekinterdependence to provide enhanced security for all. Even balance of power situa-tions need not be zero-sum. If one side seeks to upset the status quo, then its gain isat the expense of the other. But if most or all participants want a stable status quo,they can jointly gain by preserving the balance of power among them. Conversely,the politics of economic and ecological interdependence involve competition evenwhen large net benefits can be expected from cooperation. There are importantcontinuities, as well as marked differences, between the traditional politics of mili-tary security and the politics of economic and ecological interdependence.

We must also be careful not to define interdependence entirely in terms of situ-ations of evenly balanced mutual dependence. It is asymmetries in dependence thatare most likely to provide sources of influence for actors in their dealings with oneanother. Less dependent actors can often use the interdependent relationship as asource of power in bargaining over an issue and perhaps to affect other issues. At theother extreme from pure symmetry is pure dependence (sometimes disguised by call-ing the situation interdependence); but it too is rare. Most cases lie between thesetwo extremes. And that is where the heart of the political bargaining process ofinterdependence lies.

POWER AND INTERDEPENDENCE

Power has always been an elusive concept for statesmen and analysts of interna-tional politics; now it is even more slippery. The traditional view was that militarypower dominated other forms, and that states with the most military power con-trolled world affairs. But the resources that produce power capabilities have becomemore complex. In the eyes of one astute observer, “the postwar era has witnessedradical transformations in the elements, the uses, and the achievements of power.”14

And Hans Morgenthau, author of the leading realist text on international politics,


went so far in his reaction to the events of the early 1970s as to announce an histor-ically unprecedented severing of the functional relationship between political, mili-tary, and economic power shown in the possession by militarily weak countries of“monopolistic or quasi-monopolistic control of raw materials essential to the opera-tion of advanced economies.”15

Power can be thought of as the ability of an actor to get others to do some-thing they otherwise would not do (and at an acceptable cost to the actor). Powercan be conceived in terms of control over outcomes. In either case, measurementis not simple.16 We can look at the initial power resources that give an actor apotential ability; or we can look at that actor’s actual influence over patterns ofoutcomes. When we say that asymmetrical interdependence can be a source ofpower we are thinking of power as control over resources, or the potential to affectoutcomes. A less dependent actor in a relationship often has a significant politicalresource, because changes in the relationship (which the actor may be able toinitiate or threaten) will be less costly to that actor than to its partners. Thisadvantage does not guarantee, however, that the political resources provided byfavorable asymmetries in interdependence will lead to similar patterns of controlover outcomes. There is rarely a one-to-one relationship between power measuredby any type of resources and power measured by effects on outcomes. Political bar-gaining is usually a means of translating potential into effects, and a lot is oftenlost in the translation.

To understand the role of power in interdependence, we must distinguishbetween two dimensions, sensitivity and vulnerability. Sensitivity involves degrees ofresponsiveness within a policy framework—how quickly do changes in one countrybring costly changes in another, and how great are the costly effects? It is measurednot merely by the volume of flows across borders but also by the costly effects ofchanges in transactions on the societies or governments. Sensitivity interdepend-ence is created by interactions within a framework of policies. Sensitivity assumesthat the framework remains unchanged. The fact that a set of policies remains con-stant may reflect the difficulty in formulating new policies within a short time, or itmay reflect a commitment to a certain pattern of domestic and international rules.

An example of sensitivity interdependence is the way the United States, Japan,and Western Europe were affected by increased oil prices in 1971 and again in1973–1974 and 1975. In the absence of new policies, which could take many yearsor decades to implement, the sensitivity of these economies was a function of thegreater costs of foreign oil and proportion of petroleum they imported. The UnitedStates was less sensitive than Japan to petroleum price rises, because a smaller pro-portion of its petroleum requirements was accounted for by imports, but as rapidprice increases and long lines at gasoline stations showed, the United States wasindeed sensitive to the outside change. Another example of sensitivity interdepend-ence is provided by the international monetary situation prior to August 15, 1971.Given the constraints on policy created by the rules of the International MonetaryFund (IMF), European governments were sensitive to changes in American mone-tary policy, and the United States was sensitive to European decisions regardingwhether or not to demand the conversion of dollars into gold.


Sensitivity interdependence can be social or political as well as economic.* Forexample, there are social “contagion effects,” such as the trivial but rapid spread ofthe fad of “streaking” from American to Europeans society in 1974, or more signifi-cant, the way in which the development of radical student movements during thelate 1960s was reinforced by knowledge of each other’s activities. The rapid growthof transnational communications has enhanced such sensitivity. Television, byvividly presenting starvation in South Asia to Europeans and Americans about to sitdown to their dinners, is almost certain to increase attention to and concern aboutthe issue in European and American societies. Sensitivity to such an issue may bereflected in demonstrations or other political action, even if no action is taken toalleviate the distress (and no economic sensitivity thereby results).

Using the word interdependence, however, to refer only to sensitivity obscuressome of the most important political aspects of mutual dependence.17 We must alsoconsider what the situation would be if the framework of policies could be changed.If more alternatives were available, and new and very different policies were possi-ble, what would be the costs of adjusting to the outside change? In petroleum, forinstance, what matters is not only the proportion of one’s needs that is imported, butthe alternatives to imported energy and the costs of pursuing those alternatives. Twocountries, each importing 35 percent of their petroleum needs, may seem equallysensitive to price rises; but if one could shift to domestic sources at moderate cost,and the other had no such alternative, the second state would be more vulnerablethan the first. The vulnerability dimension of interdependence rests on the relativeavailability and costliness of the alternatives that various actors face.

Under the Bretton Woods monetary regime during the late 1960s, both theUnited States and Great Britain were sensitive to decisions by foreign speculators orcentral banks to shift assets out of dollars or sterling, respectively. But the UnitedStates was less vulnerable than Britain because it had the option (which it exercisedin August 1971) of changing the rules of the system at what it considered tolerablecosts. The underlying capabilities of the United States reduced its vulnerability, andtherefore made its sensitivity less serious politically.

In terms of the cost of dependence, sensitivity means liability to costly effectsimposed from outside before policies are altered to try to change the situation.Vulnerability can be defined as an actor’s liability to suffer costs imposed by externalevents even after policies have been altered. Since it is usually difficult to changepolicies quickly, immediate effects of external changes generally reflect sensitivitydependence. Vulnerability dependence can be measured only by the costliness ofmaking effective adjustments to a changed environment over a period of time.

Let us illustrate this distinction graphically by imagining three countries facedsimultaneously with an external event that imposes costs on them—for example,the situation that oil-consuming countries face when producers raise prices.

*Since we are referring to the sensitivity of economies and polities to one another, not merely to pricesensitivities or interest rate sensitivities as used by economists, our definition builds on, but differs from, that ofRichard Cooper, The Economics of Interdependence (New York: McGraw-Hill, 1968).


Time

A

B

C

Cos

ts im

pose

d by

out

side

act

ion

T5T1 T2 T3 T4

FIGURE 1.1 Sensitivity of threecountries (assume policiesunchanged)

Figure 1.1 indicates the sensitivity of the three countries to costs imposed bysuch an outside change. Initially, country A has somewhat higher sensitivity to thechange than B and much higher sensitivity than C. Over time, furthermore, C’s sen-sitivity falls even without any policy changes. This change might be caused by pricerises in country C, which gradually reduce oil consumption, and therefore reduceimports. The total sensitivity of each country over the time covered by the graph isrepresented by the area under its respective line.*

Suppose we now alter this picture by assuming that each country tries to changeits policies in order to reduce the costs imposed by outside actions. In our oil exam-ple, this attempt might involve deciding to incur the high domestic costs ofrationing or developing expensive internal energy sources. The extent of these costsand the political willingness to bear them would be the measure of vulnerability.The vulnerability of a country such as Japan is imposed primarily by that country’sphysical endowments and is virtually inescapable without drastic costs. For othercountries, such as the United States, physical vulnerability is not so great. Forinstance, American efforts to formulate a new energy policy after 1973 were slowedby the lack of domestic consensus on the issue.

In Figure 1.2, depicting vulnerability, we can see that country A’s vulnerabilityis much less than its sensitivity. A policy change at the beginning of the second timeperiod allows that country, by the third period, to reduce costs imposed by externalchange almost to the vanishing point. Country A’s diminished vulnerability wouldreflect an effective policy, to reduce costs imposed by external change almost to thevanishing point. Country A’s diminished vulnerability would reflect an effectivepolicy to become actually or potentially self-sufficient in petroleum. For instance, itmight possess new sources of energy that could be developed by the government.B and C are less able to alter their situations by changing policy, thus remaining vul-nerable to costs imposed by outside events.

*Our example is deliberately simplified. Among other things, the costs of the situation at later pointswould, of course, have to be reduced by an appropriate discount rate.

Time

A

B

C

Cos

ts im

pose

d by

out

side

act

ion

T5T1 T2 T3 T4

FIGURE 1.2 Vulnerability ofthree countries (assume policiesunchanged)


The sensitivity dependence of the three countries at the time of the first externalevent is not, therefore, the same as their vulnerability dependence at that time.Measures of the immediate effects of changes will not precisely indicate long-termsensitivities (note that C’s sensitivity declines naturally over time), but they arelikely to be even less accurate in measuring long-term vulnerabilities, which willdepend on political will, governmental ability, and resource capabilities. In our exam-ple, although country A is more sensitive than country B, it is much less vulnerable.

Vulnerability is particularly important for understanding the political structureof interdependence relationships. In a sense, it focuses on which actors are “thedefiners of the ceteris paribus clause,” or can set the rules of the game.18 Vulnerabilityis clearly more relevant than sensitivity, for example, in analyzing the politics of rawmaterials such as the supposed transformation of power after 1973. All too often, ahigh percentage of imports of a material is taken as an index of vulnerability, whenby itself it merely suggests that sensitivity may be high. The key question for deter-mining vulnerability is how effectively altered policies could bring into being suffi-cient quantities of this, or a comparable, raw material, and at what cost. The factthat the United States imports approximately 85 percent of its bauxite supply doesnot indicate American vulnerability to actions by bauxite exporters, until we knowwhat it would cost (in time as well as money) to obtain substitutes.

Vulnerability applies to sociopolitical as well as politico-economic relation-ships. The vulnerability of societies to transnational radical movements in the late1960s depended on their abilities to adjust national policies to deal with the changeand reduce the costs of disruption. When Sweden criticized American policy inVietnam, its vulnerability to a possible American suspension of cultural contactswould have depended on how it could adjust policy to the new situation. Couldexchange professors and tourists be attracted from elsewhere?19

Let us look again at the effects on the United States of a famine in South Asia. Thevulnerability of an American administration to domestic protests over its lack of a foodaid policy would depend on the ease with which it could adjust policy (for instance, byshipping more grain to India) without incurring other high political or economic costs.

How does this distinction help us understand the relationship between interde-pendence and power? Clearly, it indicates that sensitivity interdependence will beless important than vulnerability interdependence in providing power resources toactors. If one actor can reduce its costs by altering its policy, either domestically orinternationally, the sensitivity patterns will not be a good guide to power resources.

Consider trade in agricultural products between the United States and theSoviet Union from 1972 to 1975. Initially, the American economy was highly sensi-tive to Soviet grain purchases: prices of grain rose dramatically in the United States.The Soviet Union was also sensitive to the availability of surplus American stocks,since its absence could have internal political as well as economic implications. Thevulnerability asymmetries, however, ran strongly in favor of the United States, sinceits alternatives to selling grain to the USSR (Such as government storage, lowerdomestic prices, and more food aid abroad) were more attractive than the basicSoviet alternative to buying grain from the United States (slaughtering livestockand reducing meat consumption). Thus, as long as the United States governmentcould retain coherent control of the policy—that is, as long as interest groups with a


stake in expanded trade did not control it—agricultural trade could be used as a toolin political bargaining with the Soviet Union.

Vulnerability interdependence includes the strategic dimension that sensitivityinterdependence omits, but this does not mean that sensitivity is politically unim-portant. Rapidly rising sensitivity often leads to complaints about interdependenceand political efforts to alter it, particularly in countries with pluralistic political sys-tems. Textile and steel workers and manufacturers, oil consumers, and conservativessuspicious of radical movements originating abroad are all likely to demand govern-ment policies to protect their interests. Policymakers and policy analysts, however,must examine underlying patterns of vulnerability interdependence when theydecide on strategies. What can they do, at what cost? And what can other actors do,at what cost, in response? Although patterns of sensitivity interdependence mayexplain where the shoe pinches or the wheel squeaks, coherent policy must be basedon an analysis of actual and potential vulnerabilities. An attempt to manipulateasymmetrical sensitivity interdependence without regard for underlying patterns ofvulnerability is likely to fail.

Manipulating economic or sociopolitical vulnerabilities, however, also bearsrisk. Strategies of manipulating interdependence are likely to lead to counterstrate-gies. It must always be kept in mind, furthermore, that military power dominateseconomic power in the sense that economic means alone are likely to be ineffectiveagainst the serious use of military force. Thus, even effective manipulation of asym-metrical interdependence within a nonmilitary area can create risks of militarycounteraction. When the United States exploited Japanese vulnerability to eco-nomic embargo in 1940–41, Japan countered by attacking Pearl Harbor and thePhilippines. Yet military actions are usually very costly; and for many types ofactions, these costs have risen steeply during the last thirty years.

Table 1.1 shows the three types of asymmetrical interdependence that we havebeen discussing. The dominance ranking column indicates that the power resourcesprovided by military interdependence dominate those provided by nonmilitaryvulnerability, which in turn dominate those provided by asymmetries in sensitivity.Yet exercising more dominant forms of power brings higher costs. Thus, relative tocost, there is no guarantee that military means will be more effective than economicones to achieve a given purpose. We can expect, however, that as the interests atstake become more important, actors will tend to use power resources that rankhigher in both dominance and cost.

A movement from one power resource to a more effective, but more costly,resource, will be most likely where there is a substantial incongruity between the dis-tribution of power resources on one dimension and those on another. In such a situ-ation, the disadvantaged actor’s power position would be improved by raising thelevel at which the controversy is conducted. For instance, in a concession agree-ment, a multinational oil company may seem to have a better bargaining positionthan the host government. The agreement may allow the company to set the levelof output, and the price, of the petroleum produced, thus making government rev-enues to company decisions. Yet such a situation is inherently unstable, since thegovernment may be stronger on the vulnerability dimension. Once the country has


TABLE 1.1 Asymmetrical Interdependence and Its Uses

Source of independence

Dominanceranking

Costranking Contemporary use

Military (costs of using military force)

1 1 Used in extreme situations or againstweak foes when costs may be slight.

Nonmilitary vulnerability (costs of pursuing alternative policies)

2 2 Used when normative constraints are low,and international rules are not consideredbinding (including nonmilitary relationsbetween adversaries, and situations ofextremely high conflict between closepartners and allies).

Nonmilitary sensitivity (costs of change underexisting policies)

3 3 A power resource in the short run orwhen normative constraints are high andinternational rules are binding. Limited,since if high costs are imposed, disadvan-taged actors may formulate new policies.

determined that it can afford to alter the agreement unilaterally, it may have theupper hand. Any attempt by the company to take advantage of its superior positionon the sensitivity dimension, without recognizing its weakness at the vulnerabilitylevel (much less at the level of military force), is then likely to end in disaster.

We conclude that a useful beginning in the political analysis of internationalinterdependence can be made by thinking of asymmetrical interdependencies assources of power among actors. Such a framework can be applied to relations betweentransnational actors (such as multinational corporations) and governments as well asinterstate relations. Different types of interdependence lead to potential politicalinfluence, but under different constraints. Sensitivity interdependence can providethe basis for significant political influence only when the rules and norms in effectcan be taken for granted, or when it would be prohibitively costly for dissatisfiedstates to change their policies quickly. If one set of rules puts an actor in a disadvan-tageous position, that actor will probably try to change those rules if it can do so at areasonable cost. Thus influence deriving from favorable asymmetries in sensitivity isvery limited when the underlying asymmetries in vulnerability are unfavorable.Likewise, if a state chafes at its economic vulnerabilities, it may use military force toattempt to redress that situation as Japan did in 1941; or, it may subtly threaten to useforce, as did the United States in 1975, when facing the possibility of future oil boy-cotts. But in many contemporary situations, the use of force is so costly, and its threatso difficult to make credible, that a military strategy is an act of desperation.

Yet this is not the whole story of power and interdependence. Just as important asunderstanding the way that manipulation of interdependence can be an instrument ofpower is an understanding of that instrument’s limits. Asymmetrical interdependenceby itself cannot explain bargaining outcomes, even in traditional relations among


states. As we said earlier, power measured in terms of resources or potential may lookdifferent from power measured in terms of influence over outcomes. We must also lookat the “translation” in the political bargaining process. One of the most important rea-sons for this is that the commitment of a weaker state may be much greater than thatof its stronger partner. The more dependent actor may be (or appear to be) more will-ing to suffer. At the politico-military level, the United States’ attempt to coerce NorthVietnam provides an obvious example.

Yet the point holds even in more cooperative interstate relations. In theCanadian-American relationship, for example, the use or threat of force is virtuallyexcluded from consideration by either side. The fact that Canada has less militarystrength than the United States is therefore not a major factor in the bargainingprocess. The Canadians can take advantage of their superior position on such eco-nomic issues as oil and natural gas exports without fearing military retaliation or threatby the United States. Moreover, other conditions of contemporary international inter-dependence tend to limit the abilities of statesmen to manipulate asymmetrical inter-dependence. In particular, the smaller state may have greater internal political unitythan the larger one. Even though the more powerful state may be less dependent inaggregate terms, it may be more fragmented internally and its coherence reduced byconflicts of interest and difficulties of coordination within its own government.

We will explore this question further in Chapter 7 when discussing our findingson Canadian-American and Australian-American relations between 1920 and1970. What we have said is sufficient to indicate that we do not expect a measure ofpotential power, such as asymmetrical interdependence, to predict perfectly actors’successes or failures at influencing outcomes. It merely provides a first approxima-tion of initial bargaining advantages available to either side. Where predictionsbased on patterns of asymmetrical interdependence are incorrect, one must lookclosely for the reasons. They will often be found in the bargaining process that trans-lates power resources into power over outcomes.

INTERNATIONAL REGIME CHANGE

Understanding the concept of interdependence and its relevance to the conceptof power is necessary to answering the first major question of this book—what arethe characteristics of world politics under conditions of extensive interdepend-ence? Yet as we have indicated, relationships of interdependence often occurwithin, and may be affected by, networks of rules, norms, and procedures that reg-ularize behavior and control its effects. We refer to the sets of governing arrange-ments that affect relationships of interdependence as international regimes.Although not so obvious as the political bargaining process, equally important tounderstanding power and interdependence is our second major question: How andwhy do regimes change?

In world politics rules and procedures are neither so complete nor so wellenforced as in well-ordered domestic political systems, and the institutions areneither so powerful nor so autonomous. “The rules of the game include some

International Regime Change 17

national rules, some international rules, some private rules—and large areas of norules at all.”20 The weakness of international organizations and the problems ofenforcing international law sometimes mislead observers into thinking that inter-national regimes are insignificant, or into ignoring them entirely. Yet althoughoverall global integration is weak, specific international regimes often haveimportant effects on interdependent relationships that involve a few countries, orinvolve many countries on a specific issue. Since World War II, for instance, spe-cific sets of rules and procedures have been developed to guide states and transna-tional actors in a wide variety of areas, including aid to less developed countries,environmental protection, fisheries conservation, international food policy, inter-national meteorological coordination, international monetary policy, regulationof multinational corporations, international shipping policies, internationaltelecommunications policy, and international trade.21 In some cases these regimeshave been formal and comprehensive; in others informal and partial. Their effec-tiveness has varied from issue-area to issue-area and from time to time. On a moreselective or regional level, specific groups of countries such as those in theEuropean Community or the Organization for Economic Cooperation andDevelopment (OECD) have developed regimes that affect several aspects of theircountries’ relationships with each other.

International regimes may be incorporated into interstate agreements ortreaties, as were the international monetary arrangements developed at BrettonWoods in 1944, or they may evolve from proposed formal arrangements that werenever implemented, as was the General Agreement on Tariffs and Trade (GATT),which derived from the International Trade Organization proposed after World WarII. Or they may be merely implicit, as in the postwar Canadian-American relation-ship. They vary not only in their extensiveness but in the degree of adherence theyreceive from major actors. When there are no agreed norms and procedures or whenthe exceptions to the rules are more important than the instances of adherence,there is a nonregime situation.*

To understand the international regimes that affect patterns of interdepend-ence, one must look, as we will in Chapter 3, at structure and process in interna-tional systems, as well as at how they affect each other. The structure of a systemrefers to the distribution of capabilities among similar units. In international politi-cal systems the most important units are states, and the relevant capabilities havebeen regarded as their power resources. There is a long tradition of categorizing thedistribution of power in interstate systems according to the number and importanceof major actors (for instance, as unipolar, bipolar, multipolar, and dispersed) just aseconomists describe the structure of market systems as monopolistic, duopolistic,oligopolistic, and competitive.22 Structure is therefore distinguished from process,which refers to allocative or bargaining behavior within a power structure. To use

*We are concerned in this book with the general question of adherence to specified basic norms of theregimes we examine. Regimes can also be categorized in terms of the degree and type of political integrationamong the states adhering to them. See J. Nye, Peace in Parts (Boston: Little, Brown, 1971), Chapter 2, for dis-cussion of measurement of the integrative and institutional dimensions of regimes.


the analogy of a poker game, at the process level analysts are interested in how theplayers play the hands they have been dealt. At the structural level they are inter-ested in how the cards and chips were distributed as the game started.

International regimes are intermediate factors between the power structure ofan international system and the political and economic bargaining that takes placewith it. The structure of the system (the distribution of power resources amongstates) profoundly affects the nature of the regime (the more or less loose set of for-mal and informal norms, rules, and procedures relevant to the system). The regime,in turn, affects and to some extent governs the political bargaining and daily deci-sion-making that occurs within the system.

Changes in international regimes are very important. In international trade, forexample, an international regime including nondiscriminatory trade practices waslaid down by the General Agreement on Tariffs and Trade (GATT) in 1947. Forover five decades, the GATT arrangements have constituted a relatively effectiveinternational regime. But the 1970s were marked by the partly successful efforts ofless developed countries to change this regime. More broadly, by the mid-1970s, thedemands of less developed countries for a New International Economic Orderinvolved struggles over what international regimes should govern trade in raw mate-rials and manufactures as well as direct foreign investment. Yet in the 1990s devel-oped and less developed countries agreed on a new World Trade Organization(WTO), which extended and strengthened GATT.

In the two issue areas that we will investigate in Part II—money and oceans—some regime changes have been rapid and dramatic whereas others have beengradual. Dramatic changes took place in international monetary policy in 1914(suspension of the gold standard); 1931 (abandonment of the gold-exchangestandard); 1944 (agreement on the “Bretton Woods System”); and 1971 (aban-donment of the convertibility of dollars as gold). Rules governing the uses of theworld’s oceans changed more slowly, but with significant turning points in 1945and after 1967. Yet we have no theory in the field of international relations thatadequately explains such changes. Indeed, most of our theories do not focus onthis question at all.

In Chapter 3, we shall look closely at the problem of explaining the change orpersistence in the patterns of norms, rules, and procedures that govern interdepend-ence in various issues. There we will lay out four models, or intellectual constructs,designed to explain regime change, and examine their strengths and weaknesses.The models rest on different assumptions about the basic conditions of world poli-tics. Since world politics vary, over time and from place to place, there is no reasonto believe that a single set of conditions will always and everywhere apply, or thatany one model is likely to be universally applicable. Thus, before examining theexplanatory models, we shall establish the conditions under which they can beexpected to apply. As we indicate in the next chapter, in periods of rapid changesuch as the current one, assumptions about the conditions of world politics candiffer dramatically.

One’s assumptions about world politics profoundly affect what one sees and howone constructs theories to explain events. We believe that the assumptions of politi-cal realists, whose theories dominated the postwar period, are often an inadequatebasis for analyzing the politics of interdependence. The realist assumptions aboutworld politics can be seen as defining an extreme set of conditions or ideal type. Onecould also imagine very different conditions. In this chapter, we shall constructanother ideal type, the opposite of realism. We call it complex interdependence. Afterestablishing the differences between realism and complex interdependence, we shallargue that complex interdependence sometimes comes closer to reality than doesrealism. When it does, traditional explanations of change in international regimesbecome questionable and the search for new explanatory models becomes moreurgent.

For political realists, international politics, like all other politics, is a struggle forpower but, unlike domestic politics, a struggle dominated by organized violence. Inthe words of the most influential postwar textbook, “All history shows that nationsactive in international politics are continuously preparing for, actively involved in,or recovering from organized violence in the form of war.”1 Three assumptions areintegral to the realist vision. First, states as coherent units are the dominant actorsin world politics. This is a double assumption: states are predominant; and they actas coherent units. Second, realists assume that force is a usable and effective instru-ment of policy. Other instruments may also be employed, but using or threateningforce is the most effective means of wielding power. Third, partly because of theirsecond assumption, realists assume a hierarchy of issues in world politics, headed byquestions of military security: the “high politics” of military security dominates the“low politics” of economic and social affairs.

These realist assumptions define an ideal type of world politics. They allow us toimagine a world in which politics is continually characterized by active or potentialconflict among states, with the use of force possible at any time. Each state attempts to

Realism and ComplexInterdependence

2CHAPTER

19

20 Chapter 2 Realism and Complex Interdependence

defend its territory and interests from real or perceived threats. Political integrationamong states is slight and lasts only as long as it serves the national interests ofthe most powerful states. Transnational actors either do not exist or are politicallyunimportant. Only the adept exercise of force or the threat of force permits statesto survive, and only while statesmen succeed in adjusting their interests, as in a well-functioning balance of power, is the system stable.

Each of the realist assumptions can be challenged. If we challenge them allsimultaneously, we can imagine a world in which actors other than states participatedirectly in world politics, in which a clear hierarchy of issues does not exist, and inwhich force is an ineffective instrument of policy. Under these conditions—whichwe call the characteristics of complex interdependence—one would expect worldpolitics to be very different than under realist conditions.

We will explore these differences in the next section of this chapter. We do notargue, however, that complex interdependence faithfully reflects world political reality.Quite the contrary: both it and the realist portrait are ideal types. Most situations willfall somewhere between these two extremes. Sometimes, realist assumptions will beaccurate, or largely accurate, but frequently complex interdependence will provide abetter portrayal of reality. Before one decides what explanatory model to apply to asituation or problem, one will need to understand the degree to which realist orcomplex interdependence assumptions correspond to the situation.

THE CHARACTERISTICS OF COMPLEXINTERDEPENDENCE

Complex interdependence has three main characteristics:

1. Multiple channels connect societies, including: informal ties between govern-mental elites as well as formal foreign office arrangements; informal ties amongnongovernmental elites (face-to-face and through telecommunications); andtransnational organizations (such as multinational banks or corporations).These channels can be summarized as interstate, transgovernmental, andtransnational relations. Interstate relations are the normal channels assumed byrealists. Transgovernmental applies when we relax the realist assumption thatstates act coherently as units; transnational applies when we relax the assump-tion that states are the only units.

2. The agenda of interstate relationships consists of multiple issues that are notarranged in a clear or consistent hierarchy. This absence of hierarchy among issuesmeans, among other things, that military security does not consistently domi-nate the agenda. Many issues arise from what used to be considered domesticpolicy, and the distinction between domestic and foreign issues becomesblurred. These issues are considered in several government departments (notjust foreign offices), and at several levels. Inadequate policy coordination onthese issues involves significant costs. Different issues generate different coali-tions, both within governments and across them, and involve different degreesof conflict. Politics does not stop at the waters’ edge.

The Characteristics of Complex Interdependence 21

3. Military force is not used by governments toward other governments within theregion, or on the issues, when complex interdependence prevails. It may,however, be important in these governments’ relations with governmentsoutside that region, or on other issues. Military force could, for instance, beirrelevant to resolving disagreements on economic issues among members of analliance, yet at the same time be very important for that alliance’s political andmilitary relations with a rival bloc. For the former relationships this conditionof complex interdependence would be met; for the latter, it would not.

Traditional theories of international politics implicitly or explicitly deny theaccuracy of these three assumptions. Traditionalists are therefore tempted also todeny the relevance of criticisms based on the complex interdependence ideal type.We believe, however, that our three conditions are fairly well approximated onsome global issues of economic and ecological interdependence and that theycome close to characterizing the entire relationship between some countries. Oneof our purposes here is to prove that contention. In subsequent chapters we shallexamine complex interdependence in oceans policy and monetary policy and inthe relationships of the United States to Canada and Australia. In this chapter,however, we shall try to convince you to take these criticisms of traditionalassumptions seriously.

Multiple ChannelsA visit to any major airport is a dramatic way to confirm the existence of multiplechannels of contact among advanced industrial countries; there is a voluminousliterature to prove it.2 Bureaucrats from different countries deal directly with oneanother at meetings and on the telephone as well as in writing. Similarly,nongovernmental elites frequently get together in the normal course of business, inorganizations such as the Trilateral Commission, and in conferences sponsored byprivate foundations.

In addition, multinational firms and banks affect both domestic and interstaterelations. The limits on private firms, or the closeness of ties between governmentand business, vary considerably from one society to another; but the participation oflarge and dynamic organizations, not controlled entirely by governments, hasbecome a normal part of foreign as well as domestic relations.

These actors are important not only because of their activities in pursuit of theirown interests, but also because they act as transmission belts, making governmentpolicies in various countries more sensitive to one another. As the scope of govern-ments’ domestic activities has broadened, and as corporations, banks, and (to alesser extent) trade unions have made decisions that transcend national boundaries,the domestic policies of different countries impinge on one another more and more.Transnational communications reinforce these effects. Thus, foreign economicpolicies touch more domestic economic activity than in the past, blurring the linesbetween domestic and foreign policy and increasing the number of issues relevant toforeign policy. Parallel developments in issues of environmental regulation andcontrol over technology reinforce this trend.


Absence of Hierarchy among IssuesForeign affairs agendas—that is, sets of issues relevant to foreign policy with whichgovernments are concerned—have become larger and more diverse. No longer canall issues be subordinated to military security. As Secretary of State Kissingerdescribed the situation in 1975:

progress in dealing with the traditional agenda is no longer enough. A newand unprecedented kind of issue has emerged. The problems of energy,resources, environment, population, the uses of space and the seas now rankwith questions of military security, ideology and territorial rivalry which havetraditionally made up the diplomatic agenda.3

Kissinger’s list, which could be expanded, illustrates how governments’policies, even those previously considered merely domestic, impinge on oneanother. The extensive consultative arrangements developed by the OECD, as wellas the GATT, IMF, and the European Community, indicate how characteristic theoverlap of domestic and foreign policy is among developed pluralist countries. Theorganization within nine major departments of the United States government(Agriculture; Commerce; Defense; Health, Education and Welfare; Interior;Justice; Labor; State; and Treasury) and many other agencies reflects their exten-sive international commitments. The multiple, overlapping issues that result makea nightmare of governmental organizations.4

When there are multiple issues on the agenda, many of which threaten theinterests of domestic groups but do not clearly threaten the nation as a whole, theproblems of formulating a coherent and consistent foreign policy increase. In 1975energy was a foreign policy problem, but specific remedies, such as a tax on gasolineand automobiles, involved domestic legislation opposed by auto workers andcompanies alike. As one commentator observed, “virtually every time Congress hasset a national policy that changed the way people live...the action came after aconsensus had developed, bit by bit, over the years, that a problem existed and thatthere was one best way to solve it.”5 Opportunities for delay, for special protection,for inconsistency and incoherence abound when international politics requiresaligning the domestic policies of pluralist democratic countries.

Minor Role of Military ForcePolitical scientists have traditionally emphasized the role of military force in inter-national politics. As we saw in the first chapter, force dominates other means ofpower: if there are no constraints on one’s choice of instruments (a hypotheticalsituation that has only been approximated in the two world wars), the state withsuperior military force will prevail. If the security dilemma for all states wereextremely acute, military force, supported by economic and other resources, wouldclearly be the dominant source of power. Survival is the primary goal of all states,and in the worst situations, force is ultimately necessary to guarantee survival. Thusmilitary force is always a central component of national power.

The Characteristics of Complex Interdependence 23

Yet particularly among industrialized, pluralist countries, the perceived marginof safety has widened: fears of attack in general have declined, and fears of attacks byone another are virtually nonexistent. France has abandoned the tous azimuts(defense in all directions) strategy that President de Gaulle advocated (it was nottaken entirely seriously even at the time). Canada’s last war plans for fighting theUnited States were abandoned half a century ago. Britain and Germany no longerfeel threatened by each other. Intense relationships of mutual influence existbetween these countries, but in most of them force is irrelevant or unimportant as aninstrument of policy.

Moreover, force is often not an appropriate way of achieving other goals (suchas economic and ecological welfare) that are becoming more important. It is notimpossible to imagine dramatic conflict or revolutionary change in which the use orthreat of military force over an economic issue or among advanced industrial coun-tries might become plausible. Then realist assumptions would again be a reliableguide to events. But in most situations, the effects of military force are both costlyand uncertain.6

Even when the direct use of force is barred among a group of countries, however,military power can still be used politically. During the Cold War each superpowerused the threat of force to deter attacks by other superpowers on itself or its allies; itsdeterrence ability thus served an indirect, protective role, which it could use inbargaining on other issues with its allies. This bargaining tool was particularlyimportant for the United States, whose allies were concerned about potential Sovietthreats and which had fewer other means of influence over its allies than did theSoviet Union over its Eastern European partners. The United States had, accord-ingly, taken advantage of the Europeans’ (particularly the Germans’) desire for itsprotection and linked the issue of troop levels in Europe to trade and monetarynegotiations. Thus, although the first-order effect of deterrent force was essentiallynegative—to deny effective offensive power to a superpower opponent—statescould use that force positively—to gain political influence.

Thus, even for countries whose relations approximate complex interdepend-ence, two serious qualifications remain: (1) drastic social and political change couldcause force again to become an important direct instrument of policy; and (2) evenwhen elites’ interests are complementary, a country that uses military force toprotect another may have significant political influence over the other country.

In North-South relations, or relations among Third World countries, as well asin East-West relations, force is often important. Military power helped the SovietUnion to dominate Eastern Europe economically as well as politically. The threat ofopen or covert American military intervention helped to limit revolutionarychanges in the Caribbean, especially in Guatemala in 1954 and in the DominicanRepublic in 1965. Secretary of State Kissinger, in January 1975, issued a veiledwarning to members of the Organization of Petroleum Exporting Countries (OPEC)that the United States might use force against them “where there is some actualstrangulation of the industrialized world.”7

Even in these rather conflicted situations, however, the recourse to force seemsless likely now than at most times during the century before 1945. The destructiveness


of nuclear weapons makes any attack against a nuclear power dangerous. Nuclearweapons are mostly used as a deterrent. Threats of nuclear action against muchweaker countries may occasionally be efficacious, but they are equally or more likelyto solidify relations between one’s adversaries. The limited usefulness of conventionalforce to control socially mobilized populations has been shown by the United Statesfailure in Vietnam as well as by the rapid decline of colonialism in Africa.Furthermore, employing force on one issue against an independent state with whichone has a variety of relationships is likely to rupture mutually profitable relations onother issues. In other words, the use of force often has costly effects on nonsecuritygoals. And finally, in Western democracies, popular opposition to prolonged militaryconflicts is very high.8

It is clear that these constraints bear unequally on various countries, or on thesame countries in different situations. Risks of nuclear escalation affect everyone,but domestic opinion is far less constraining for authoritarian powers than for theUnited States, Europe, or Japan. Even authoritarian countries may be reluctant touse force to obtain economic objectives when such use might be ineffective anddisrupt other relationships. Both the difficulty of controlling socially mobilizedpopulations with foreign troops and the changing technology of weaponry mayactually enhance the ability of certain countries, or nonstate groups, to use terrorismas a political weapon without effective fear of reprisal.

The fact that the changing role of force has uneven effects does not make thechange less important, but it does make matters more complex. This complexity iscompounded by differences in the usability of force among issue areas. When anissue arouses little interest or passion, force may be unthinkable. In such instances,complex interdependence may be a valuable concept for analyzing the politicalprocess. But if that issue becomes a matter of life and death—as some peoplethought oil might become—the use or threat of force could become decisive again.Realist assumptions would then be more relevant.

It is thus important to determine the applicability of realism or of complexinterdependence to each situation. Without this determination, further analysis islikely to be confused. Our purpose in developing an alternative to the realistdescription of world politics is to encourage a differentiated approach that distin-guishes among dimensions and areas of world politics—not (as some modernistobservers do) to replace one oversimplification with another.

THE POLITICAL PROCESSES OF COMPLEXINTERDEPENDENCE

The three main characteristics of complex interdependence give rise to distinctivepolitical processes, which translate power resources into power as control ofoutcomes. As we argued earlier, something is usually lost or added in the translation.Under conditions of complex interdependence the translation will be different thanunder realist conditions, and our predictions about outcomes will need to beadjusted accordingly.

The Political Processes of Complex Interdependence 25

In the realist world, military security will be the dominant goal of states. It willeven affect issues that are not directly involved with military power or territorialdefense. Nonmilitary problems will not only be subordinated to military ones; theywill be studied for their politico-military implications. Balance of payments issues,for instance, will be considered at least as much in the light of their implications forworld power generally as for their purely financial ramifications. McGeorge Bundyconformed to realist expectations when he argued in 1964 that devaluation of thedollar should be seriously considered if necessary to fight the war in Vietnam.9 Tosome extent, so did former Treasury Secretary Henry Fowler when he contended in1971 that the United States needed a trade surplus of $4 billion to $6 billion inorder to lead in Western defense.10

In a world of complex interdependence, however, one expects some officials,particularly at lower levels, to emphasize the variety of state goals that must bepursued. In the absence of a clear hierarchy of issues, goals will vary by issue, andmay not be closely related. Each bureaucracy will pursue its own concerns; andalthough several agencies may reach compromises on issues that affect them all,they will find that a consistent pattern of policy is difficult to maintain. Moreover,transnational actors will introduce different goals into various groups of issues.

Linkage StrategiesGoals will therefore vary by issue area under complex interdependence, but so willthe distribution of power and the typical political processes. Traditional analysisfocuses on the international system, and leads us to anticipate similar politicalprocesses on a variety of issues. Militarily and economically strong states will domi-nate a variety of organizations and a variety of issues, by linking their own policieson some issues to other states’ policies on other issues. By using their overall domi-nance to prevail on their weak issues, the strongest states will, in the traditionalmodel, ensure a congruence between the overall structure of military and economicpower and the pattern of outcomes on any one issue area. Thus world politics can betreated as a seamless web.

Under complex interdependence, such congruence is less likely to occur. Asmilitary force is devalued, militarily strong states will find it more difficult to usetheir overall dominance to control outcomes on issues in which they are weak. Andsince the distribution of power resources in trade, shipping, or oil, for example, maybe quite different, patterns of outcomes and distinctive political processes are likelyto vary from one set of issues to another. If force were readily applicable, and militarysecurity were the highest foreign policy goal, these variations in the issue structuresof power would not matter very much. The linkages drawn from them to militaryissues would ensure consistent dominance by the overall strongest states. But whenmilitary force is largely immobilized, strong states will find that linkage is less effec-tive. They may still attempt such links, but in the absence of a hierarchy of issues,their success will be problematic.

Dominant states may try to secure much the same result by using overall economicpower to affect results on other issues. If only economic objectives are at stake, they may


succeed: money, after all, is fungible. But economic objectives have political implica-tions, and economic linkage by the strong is limited by domestic, transnational, andtransgovernmental actors who resist having their interests traded off. Furthermore, theinternational actors may be different on different issues, and the international organiza-tions in which negotiations take place are often quite separate. Thus it is difficult, forexample, to imagine a military or economically strong state linking concessions onmonetary policy to reciprocal concessions in oceans policy. On the other hand, poorweak states are not similarly inhibited from linking unrelated issues, partly because theirdomestic interests are less complex. Linkage of unrelated issues is often a means ofextracting concessions or side payments from rich and powerful states. And unlikepowerful states whose instrument for linkage (military force) is often too costly to use,the linkage instrument used by poor, weak states—international organization—is avail-able and inexpensive.

Thus as the utility of force declines, and as issues become more equal in impor-tance, the distribution of power within each issue will become more important. Iflinkages become less effective on the whole, outcomes of political bargaining willincreasingly vary by issue area.

The differentiation among issue areas in complex interdependence means thatlinkages among issues will become more problematic and will tend to reduce ratherthan reinforce international hierarchy. Linkage strategies, and defense against them,will pose critical strategic choices for states. Should issues be considered separatelyor as a package? If linkages are to be drawn, which issues should be linked, and onwhich of the linked issues should concessions be made? How far can one push a link-age before it becomes counterproductive? For instance, should one seek formalagreements or informal, but less politically sensitive, understandings? The fact thatworld politics under complex interdependence is not a seamless web leads us toexpect that efforts to stitch seams together advantageously, as reflected in linkagestrategies, will, very often, determine the shape of the fabric.

The negligible role of force leads us to expect states to rely more on other instru-ments in order to wield power. For the reasons we have already discussed, lessvulnerable states will try to use asymmetrical interdependence in particular groupsof issues as a source of power; they will also try to use international organizations andtransnational actors and flows. States will approach economic interdependence interms of power as well as its effects on citizens’ welfare, although welfare considera-tions will limit their attempts to maximize power. Most economic and ecologicalinterdependence involves the possibility of joint gains, or joint losses. Mutualawareness of potential gains and losses and the danger of worsening each actor’sposition through overly rigorous struggles over the distribution of the gains can limitthe use of asymmetrical interdependence.

Agenda SettingOur second assumption of complex interdependence, the lack of clear hierarchyamong multiple issues, leads us to expect that the politics of agenda formation andcontrol will become more important. Traditional analyses lead statesmen to focus on


politico-military issues and to pay little attention to the broader politics of agendaformation. Statesmen assume that the agenda will be set by shifts in the balance ofpower, actual or anticipated, and by perceived threats to the security of states. Otherissues will only be very important when they seem to affect security and militarypower. In these cases, agendas will be influenced strongly by considerations of theoverall balance of power.

Yet, today, some nonmilitary issues are emphasized in interstate relations atone time, whereas others of seemingly equal importance are neglected or quietlyhandled at a technical level. International monetary politics, problems ofcommodity terms of trade, oil, food, and multinational corporations have all beenimportant during the last decade; but not all have been high on interstate agendasthroughout that period.

Traditional analysts of international politics have paid little attention to agendaformation: to how issues come to receive sustained attention by high officials. Thetraditional orientation toward military and security affairs implies that the crucialproblems of foreign policy are imposed on states by the actions or threats of otherstates. These are high politics as opposed to the low politics of economic affairs. Yet,as the complexity of actors and issues in world politics increases, the utility of forcedeclines and the line between domestic policy and foreign policy becomes blurred:as the conditions of complex interdependence are more closely approximated, thepolitics of agenda formation becomes more subtle and differentiated.

Under complex interdependence we can expect the agendas to be affected bythe international and domestic problems created by economic growth and increas-ing sensitivity interdependence that we described in the last chapter. Discontenteddomestic groups will politicize issues and force more issues once considered domes-tic onto the interstate agenda. Shifts in the distribution of power resources withinsets of issues will also affect agendas. During the early 1970s the increased power ofoil-producing governments over the transnational corporations and the consumercountries dramatically altered the policy agenda. Moreover, agendas for one groupof issues may change as a result of linkages from other groups in which powerresources are changing; for example, the broader agenda of North-South tradeissues changed after the OPEC price rises and the oil embargo of 1973–74. Even ifcapabilities among states do not change, agendas may be affected by shifts in theimportance of transnational actors. The publicity surrounding multinationalcorporations in the early 1970s, coupled with their rapid growth over the pasttwenty years, put the regulation of such corporations higher on both the UnitedNations agenda and national agendas.

Politicization—agitation and controversy over an issue that tend to raise it tothe top of the agenda—can have many sources, as we have seen. Governmentswhose strength is increasing may politicize issues, by linking them to other issues.An international regime that is becoming ineffective or is not serving importantissues may cause increasing politicization, as dissatisfied governments press forchange. Politicization, however, can also come from below. Domestic groups maybecome upset enough to raise a dormant issue, or to interfere with interstatebargaining at high levels. In 1974 the American Secretary of State’s tacit linkage of


a Soviet-American trade pact with progress in detente was upset by the success ofdomestic American groups working with Congress to link a trade agreement withSoviet policies on emigration.

The technical characteristics and institutional setting in which issues areraised will strongly affect politicization patterns. In the United States, congres-sional attention is an effective instrument of politicization. Generally, we expecttransnational economic organizations and transgovernmental networks of bureau-crats to seek to avoid politicization. Domestically based groups (such as tradeunions) and domestically oriented bureaucracies will tend to use politicization(particularly congressional attention) against their transnationally mobilecompetitors. At the international level, we expect states and actors to “shop amongforums” and struggle to get issues raised in international organizations that willmaximize their advantage by broadening or narrowing the agenda.

Transnational and Transgovernmental RelationsOur third condition of complex interdependence, multiple channels of contactamong societies, further blurs the distinction between domestic and internationalpolitics. The availability of partners in political coalitions is not necessarily limitedby national boundaries as traditional analysis assumes. The nearer a situation is tocomplex interdependence, the more we expect the outcomes of political bargainingto be affected by transnational relations. Multinational corporations may be signifi-cant both as independent actors and as instruments manipulated by governments.The attitudes and policy stands of domestic groups are likely to be affected bycommunications, organized or not, between them and their counterparts abroad.

Thus the existence of multiple channels of contact leads us to expect limits,beyond those normally found in domestic politics, on the ability of statesmen tocalculate the manipulation of interdependence or follow a consistent strategy oflinkage. Statesmen must consider differential as well as aggregate effects of inter-dependence strategies and their likely implications for politicization and agendacontrol. Transactions among societies—economic and social transactions morethan security ones—affect groups differently. Opportunities and costs fromincreased transnational ties may be greater for certain groups—for instance,American workers in the textile or shoe industries—than for others. Some organ-izations or groups may interact directly with actors in other societies or with othergovernments to increase their benefits from a network of interaction. Some actorsmay therefore be less vulnerable as well as less sensitive to changes elsewhere inthe network than are others, and this will affect patterns of political action.

The multiple channels of contact found in complex interdependence are notlimited to nongovernmental actors. Contacts between governmental bureaucraciescharged with similar tasks may not only alter their perspectives but lead to transgov-ernmental coalitions on particular policy questions. To improve their chances ofsuccess, government agencies attempt to bring actors from other governments intotheir own decision-making processes as allies. Agencies of powerful states such asthe United States have used such coalitions to penetrate weaker governments in


such countries as Turkey and Chile. They have also been used to help agencies ofother governments penetrate the United States bureaucracy.11 As we shall see inChapter 7, transgovernmental politics frequently characterizes Canadian-Americanrelations, often to the advantage of Canadian interests.

The existence of transgovernmental policy networks leads to a different inter-pretation of one of the standard propositions about international politics—thatstates act in their own interest. Under complex interdependence, this conventionalwisdom begs two important questions: which self and which interest? A governmentagency may pursue its own interests under the guise of the national interest; andrecurrent interactions can change official perceptions of their interests. As a carefulstudy of the politics of United States trade policy has documented, concentratingonly on pressures of various interests for decisions leads to an overly mechanisticview of a continuous process and neglects the important role of communications inslowly changing perceptions of self-interest.12

The ambiguity of the national interest raises serious problems for the top politicalleaders of governments. As bureaucracies contact each other directly across nationalborders (without going through foreign offices), centralized control becomes moredifficult. There is less assurance that the state will be united when dealing with foreigngovernments or that its components will interpret national interests similarly whennegotiating with foreigners. The state may prove to be multifaceted, even schizo-phrenic. National interests will be defined differently on different issues, at differenttimes, and by different governmental units. States that are better placed to maintaintheir coherence (because of a centralized political tradition such as France’s) will bebetter able to manipulate uneven interdependence than fragmented states that at firstglance seem to have more resources in an issue area.

Role of International OrganizationsFinally, the existence of multiple channels leads one to predict a different and signifi-cant role for international organizations in world politics. Realists in the tradition ofHans J. Morgenthau have portrayed a world in which states, acting from self-interest,struggle for “power and peace.” Security issues are dominant; war threatens. In such aworld, one may assume that international institutions will have a minor role, limited bythe rare congruence of such interests. International organizations are then clearlyperipheral to world politics. But in a world of multiple issues imperfectly linked, inwhich coalitions are formed transnationally and transgovernmentally, the potentialrole of international institutions in political bargaining is greatly increased. In particu-lar, they help set the international agenda, and act as catalysts for coalition-formationand as arenas for political initiatives and linkage by weak states.

Governments must organize themselves to cope with the flow of businessgenerated by international organizations. By defining the salient issues, anddeciding which issues can be grouped together, organizations may help to deter-mine governmental priorities and the nature of interdepartmental committeesand other arrangements within governments. The 1972 Stockholm EnvironmentConference strengthened the position of environmental agencies in various


governments. The 1974 World Food Conference focused the attention of impor-tant parts of the United States government on prevention of food shortages. TheSeptember 1975 United Nations special sesssion on proposals for a NewInternational Economic Order generated an intragovernmental debate aboutpolicies toward the Third World in general. The International Monetary Fundand the General Agreement on Tariffs and Trade have focused governmentalactivity on money and trade instead of on private direct investment, which hasno comparable international organization.

By bringing officials together, international organizations help to activatepotential coalitions in world politics. It is quite obvious that international organ-izations have been very important in bringing together representatives of lessdeveloped countries, most of which do not maintain embassies in one another’scapitals. Third World strategies of solidarity among poor countries have beendeveloped in and for a series of international conferences, mostly under theauspices of the United Nations.13 International organizations also allow agenciesof governments, which might not otherwise come into contact, to turn potentialor tacit coalitions into explicit transgovernmental coalitions characterized bydirect communications. In some cases, international secretariats deliberatelypromote this process by forming coalitions with groups of governments, or withunits of governments, as well as with nongovernmental organizations havingsimilar interests.14

International organizations are frequently congenial institutions for weakstates. The one-state-one-vote norm of the United Nations system favors coali-tions of the small and powerless. Secretariats are often responsive to Third Worlddemands. Furthermore, the substantive norms of most international organizations,as they have developed over the years, stress social and economic equity as well asthe equality of states. Past resolutions expressing Third World positions, some-times agreed to with reservations by industrialized countries, are used to legitimizeother demands. These agreements are rarely binding, but up to a point the normsof the institution make opposition look more harshly self-interested and lessdefensible.

International organizations also allow small and weak states to pursue linkagestrategies. In the discussions on a New International Economic Order, ThirdWorld states insisted on linking oil price and availability to other questions onwhich they had traditionally been unable to achieve their objectives. As we shallsee in Chapters 4 through 6, small and weak states have also followed a strategyof linkage in the series of Law of the Sea conferences sponsored by the UnitedNations.

Complex interdependence therefore yields different political patternsthan does the realist conception of the world. (Table 2.1 summarizes thesedifferences.) Thus, one would expect traditional theories to fail to explain inter-national regime change in situations of complex interdependence. But, for asituation that approximates realist conditions, traditional theories should beappropriate. In the next chapter we shall look at the problem of understandingregime change.


TABLE 2.1 Political Processes under Conditions of Realism and ComplexInterdependence

Realism Complex interdependence

Goals of actors

Military security will be the dominant goal.

Goals of states will vary by issue area.Transgovernmental politics will makegoals difficult to define. Transnationalactors will pursue their own goals.

Instruments of state policy

Military force will be most effective, although economic and other instruments will also be used.

Power resources specific to issue areaswill be most relevant. Manipulation ofinterdependence, international organ-izations, and transnational actors willbe major instruments.

Agenda formation

Potential shifts in the balance of power and security threats will set agenda in high politics and will strongly influence other agendas.

Agenda will be affected by changes inthe distribution of power resourceswithin issue areas; the status of inter-national regimes; changes in theimportance of transnational actors;linkages from other issues and politi-cization as a result of rising sensitivityinterdependence.

Linkages of issues

Linkages will reduce differences in outcomes among issue areas and reinforce international hierarchy.

Linkages by strong states will be moredifficult to make since force will beineffective. Linkages by weak statesthrough international organizationswill erode rather than reinforcehierarchy.

Roles of international organizations

Roles are minor, limited by state power and the importance of military force.

Organizations will set agendas, inducecoalition-formation, and act as arenasfor political action by weak states.Ability to choose the organizationalforum for an issue and to mobilizevotes will be an important politicalresource.

32

International regimes help to provide the political framework within which inter-national economic processes occur. Understanding the development and breakdownof regimes is central to understanding the politics of interdependence. Why dointernational regimes change?

In this chapter we shall present four models based respectively on changes in (1)economic processes, (2) the overall power structure in the world, (3) the powerstructure within issue areas, and (4) power capabilities as affected by internationalorganization. We shall begin with the first two models, because they are the simplestand most familiar. We shall then add complexity by considering the more novelissue structure and international organization models.

AN ECONOMIC PROCESS EXPLANATION

Many observers have pointed to the increased importance of economic issues ininternational politics. Indeed, struggles over the governance of economic issues areresponsible for much of the increased attention to interdependence. The contempo-rary Western science of international economics, however, does not have a theory ofinternational regime change. Neoclassical economic analysis was developed not as afaithful description of reality, but as a simplified explanation that would also suggestpolicies for increasing economic efficiency and welfare. Quite deliberately,economic theorists have abstracted away from politics in order to achieve moreprecise and elegant economic explanations. Thus we cannot blame economists fornot providing a model of regime change from conventional economic theory,because their questions are different from political scientists’. Political scientiststend to focus on power, whereas, “if we look at the main run of economic theoryover the past hundred years we find that it is characterized by a strange lack of powerconsiderations.”1

Explaining InternationalRegime Change

3CHAPTER

An Economic Process Explanation 33

The fact that a particular activity is characterized by nonpolitical behavior—forinstance, transactions carried on through a competitive price system—does notimply that political power is unimportant. The effect of politics may be indirect; itmay determine the relationships within which day-to-day economic processes takeplace. Critics of pluralistic approaches to local and national politics have pointedout that this second “face of power” is extremely important in determining whichissues are raised for political decision.2

For example, the major economic features of the postwar period—rapidlyexpanding and generally nondiscriminatory trade, large-scale and rapid movementsof funds from one center to another under fixed exchange rates, and the rapidgrowth of huge multinational enterprises—depended on a political environmentfavorable to large-scale internationalized capitalism. Moreover, economic bargain-ing is affected by the uneven distribution of effective demand—the wealthiestconsumers have the most votes in the market—and by the rules and institutionsthat reflect past patterns of strength.

A departure from perfect competition always introduces political factorsinto the analysis. Once firms can exercise some control over their environments,problems of bargaining, strategy, influence, and leadership immediately arise.Although economic analysis can provide important insights into regime change, nosophisticated observers, including neo-classical economists, would propose it asan adequate explanation. To explain regime change, we will have to use modelswith explicit political assumptions. But we will also have to include insights aboutchanging economic processes.

A model of regime change based on economic processes would begin with tech-nological and economic changes. Particularly during the last fifty years, economicgrowth in the industrialized world has proceeded at an unprecedented pace. Worldtrade has grown by more than 7 percent per year and has become a larger proportionof gross national product for most major countries of Europe and North America.Direct foreign investment and overseas production have grown even faster.3

Behind these changes lie remarkable advances in transportation and communica-tions technology, which have reduced the costs of distance. Using communicationssatellites, the cost of telephoning a person 12,000 miles away is the same as that oftelephoning someone much closer. (Chapter 9 updates this analysis by focusing ontwenty-first century technologies such as the Internet.) Supertankers and otherinnovations in shipping technology have reduced the costs of transportinggoods. And over the same period, governments have been drawn into agreements,consultations, and institutions to cope with rapidly expanding transactions.

The first premise of an economic process model of regime change is thattechnological change and increases in economic interdependence will makeexisting international regimes obsolete. They will be inadequate to cope withthe increased volume of transactions or new forms of organization represented,for instance, by transnational corporations. Established institutions, rules, andprocedures will be threatened with ineffectiveness or collapse.

The second premise is that governments will be highly responsive to domesticpolitical demands for a rising standard of living. National economic welfare will

34 Chapter 3 Explaining International Regime Change

usually be the dominant political goal, and a rising gross national product will be acritical political indicator. The third premise of this model is that the great aggre-gate economic benefits provided by international movements of capital, goods, andin some cases labor will give governments strong incentives to modify or reconstructinternational regimes to restore their effectiveness. Governments will argue over thedistribution of gains and complain about the loss of autonomy entailed in risingeconomic interdependence (vulnerability as well as sensitivity); but they will gener-ally find that, when there are domestic political demands for greater economicwelfare, the welfare costs of disrupting international economic relations, or allowingthem to become chaotic, are greater than the autonomy benefits. Reluctantly,they will permit economic interdependence to grow, and even more reluctantly,but inexorably, they will be drawn into cooperating in the construction of newinternational regimes by creating integrated policy responses. Thus, regime changewill be a process of gradually adapting to new volumes and new forms of transna-tional economic activity. Governments will resist the temptation to disrupt or breakregimes because of the high costs to economic growth.

On the basis of an economic process model, one should therefore expectinternational regimes to be undermined from time to time by economic and techno-logical change; but they will not disintegrate entirely, at least not for long. They willquickly be reconstructed to adapt to economic and technological conditions.

This simple economic process model does not correspond exactly to the views ofany sophisticated theorist, although it seems to exert a powerful influence on theviews of many people. Projections made in the 1970s that in the year 2000 a hand-ful of multinational corporations would control most of world production, and wieldgreater power than governments, or assertions that increases in interdependencemake greater international integration inevitable reflect trends of rising interde-pendence. Part of the appeal of this approach is its grasp of the importance of tech-nological change in explaining developments over the last century.

Political reality, however, often diverges from expectations based simplyon technological and economic trends. Quite evidently, governments continuallysacrifice economic efficiency to security, autonomy, and other values in policydecisions. Furthermore, this simple economic growth model skims over the difficultyof moving from one equilibrium situation to another and thus does not confront theinevitable political questions about adjustments. In politics, adjustment is crucial—indeed, power has been defined by one political scientist as “the ability not to haveto adjust to change.”4 In policymaking adjustment is critical because the views ofpowerful interests about the costs of change and their distribution largely determinethe support a policy will command.

Rapidly rising economic interdependence can create fear and insecurity amongpolitically important groups. Labor unions and local community leaders may fearthat a corporate decision to shift production abroad or trends toward greaterimports could cause severe unemployment and social distress. Industries threatenedby imports press for governmental protections. Thus, protectionism may increase aseconomic interdependence becomes more extensive. Protectionism has alwaysbeen with us. But as the technology of communication and large-scale corporate

Overall Power Structure Explanation 35

organization have reduced the natural buffers between markets, many domesticgroups have turned to government to establish political buffers. Even when a coun-try is not threatened by increased vulnerability, the sensitivity of its interest groupscan stimulate it to adopt policies that restrict international transactions.

The conflicts generated by increased interdependence have contributed tocontroversy over international regimes, which often erupts quite suddenly. Yet asimple economic growth approach is not very effective in explaining variations,since its major explanatory variable is a long-term secular trend (technologicalchange reducing costs of transnational activity over great distances, and thereforeincreasing such activity, and leading to greater sensitivity). Why have internationalregimes been developed and maintained at some times, whereas at other times,no regime can be successfully instituted? If economic growth were a sufficient expla-nation, one would expect international economic interdependence successively to“outgrow” regime constraints, and new regimes, better adapted to the new situationof interdependence, quickly to replace them. Increased sensitivity would lead to newissues and new problems; but a problem-solving orientation would lead policymakersto new regime solutions.

Yet such an explanation obviously abstracts from interests, which may divergesharply from group to group, sector to sector, or country to country. It also assumesthat international politico-military policy decisions are separate from economicones. In 1945, international institutional decisions created a two-track or multitrackregime in which economic and security issues were kept fairly separate in day-to-daypolitical processes.5 They were usually linked only hierarchically in domesticpolitics, through appeals to common security goals as a means of limiting economicconflicts, or potential conflicts with the goals of subnational groups. Yet thisseparation and depoliticization of economic issues is not the norm in world politics.Indeed, it may well have been an anomaly, dependent on postwar United Stateseconomic and military dominance and alliance leadership. Because the extent ofinterdependence and its effects depend to a considerable extent on high-levelpolitical decisions and agreements, traditional approaches to international politics,which have concentrated on these high-level decisions and the overall powerstructure, should contribute to an adequate explanation.

OVERALL POWER STRUCTURE EXPLANATION

Eroding HegemonyThere is nothing new about certain kinds of interdependence among states. Athensand Sparta were interdependent in military security at the time of Thucydides. TheUnited States and the Soviet Union were similarly interdependent between 1947and 1991. Not only were the two countries sensitive to changes in each other’s secu-rity policies, but they were also vulnerable to each other’s security decisions. Exactlythis high level of interdependence in one issue area—military security—coupledwith mutual antagonism has been at the heart of traditional analyses of world


politics. Under such circumstances security issues take precedence over others,and the distribution of military power (with its supporting economic basis)determines the power structure. War is the most important and dramatic source ofstructural change. Our own era, for instance, still bears the marks of the outcome ofWorld War II.

In the traditional view, powerful states make the rules. As Thucydides put it,“the strong do what they can and the weak suffer what they must.”6 In bilateralrelations, the traditionalists expect that the stronger of two states will usually prevailwhen issues arise between them. Within a system, the structure (that is, the distri-bution of power among the states in it) determines the nature of its internationalregimes. And the most important power resources are military.

The appeal of the traditional approach based on the overall power structure liesin its simplicity and parsimonious prediction. Judgments of relative power seem easyto make on the basis of military strength, and it is possible to calculate a rationalcourse of action in any given situation:

We assume that statesmen think and act in terms of interest defined as power,and the evidence of history bears that assumption out. That assumption allowsus to retrace and anticipate, as it were, the steps a statesman—past, present, orfuture—has taken or will take on the political scene. We look over his shoulderwhen he writes his dispatches; we listen in on his conversation with otherstatesmen; we read and anticipate his very thoughts.7

In its more extreme formulations, this realist approach deprecates domesticpolitics by suggesting that the national interest must be calculated in terms of power,relative to other states, and that if it is not, the result will be catastrophic. There islittle margin for choice. If domestic politics interferes with diplomacy, disaster willfollow. Less drastic expositions of the traditional view allow for the effect of domes-tic politics, but the principal focus of the theory—and the segment of it that providesits explanatory power—centers on competition among states. It is competitionamong autonomous actors that provides the basic driving force of world politics.

The traditional view does not have a thoroughly articulated and agreed-ontheory of regime change. Its emphasis on state power and international structure—defined in terms of power capabilities—does, however, provide the basis for devel-oping such a theory on realist premises. The basic dynamic is provided by the assertionthat as the power of states changes (that is, as the structure changes), the rules thatcomprise international regimes will change accordingly. This dynamic is at the heartof our model of regime change based on the overall power structure.

This overall structure approach does not differentiate significantly among issueareas in world politics. On the contrary, it predicts a strong tendency towardcongruence of outcomes among issue areas. Since power, like money, is consideredfungible, power resources will be shifted by major states to secure equal marginalreturns in all areas. When outcomes on one issue area are markedly different fromthose on others, we should expect shifts to make outcomes in the deviant area moreconsistent with the world structure of military and economic power. It follows fromthis view, for instance, that after 1973 the incongruity between power in petroleum


politics and power generally in world politics was a source of instability. It was to beexpected that the United States and other industrialized countries would attemptto reduce the incongruity in their favor by mutual aid, encouragement of newsources of supply, and even by threats of military force. Nor was it surprising that oil-exporting states, linked in the Organization of Petroleum Exporting Countries(OPEC), would try to resolve the tension in their favor by increasing theirstrength through arms purchases, alliances with other Third World countries for anew international economic order, deals with individual consumer countries, andambiguous long-term development plans. Because of the overall power disparities,however, traditional theory would give OPEC states less chance of success.

These expectations about which side will prevail may or may not be confirmed,but the realist insight is important: we should examine closely situations in whichthe distribution of power between issue areas is uneven. Tensions develop at thesepoint of incongruity. Crucial political struggles take place to determine whetherchanges in the power structure of one issue area will spread to the system as a whole,or be suppressed.

Even in the absence of war or the overt use of force, traditional views stressingthe overall power structure can be adapted to explain changes in internationalregimes. If the strong make the rules, then shifts in politico-military power shouldaffect economic regimes. The overall structure approach directs our attention tohegemony and leadership. Economists have argued that stable economic regimesrequire leadership—that is, willingness to forego short-term gains in bargainingin order to preserve the regime—and that an actor is most likely to provide suchleadership when it sees itself as a major consumer of the long-term benefits producedby the regime.

Realists would add that such leadership in maintaining a regime would bemost likely in a hegemonial system: that is, when one state is powerful enough tomaintain the essential rules governing interstate relations, and willing to do so. Inaddition to its role in maintaining a regime, such a state can abrogate existing rules,prevent the adoption of rules that it opposes, or play the dominant role inconstructing new rules. In a hegemonial system, therefore, the preponderant statehas both positive and negative power.

In a realist world, such a condition would imply military preponderance, but notnecessarily frequent use of military force. In the nineteenth century, Britain occa-sionally used its preponderant naval power to force free trade in South America orto protect freedom of the seas from the encroachment of coastal states, but generallysuch actions were unnecessary. A hegemonial power can change the rules ratherthan adapt its policies to the existing rules. Britain’s position as defender of freedomof the seas, for example, did not deter her from interfering with neutral shippingwhen she was at war. But during peacetime, the British government led in regimemaintenance by scrupulously enforcing free seas rules against its own domestic interests,which attempted to assert broader coastal jurisdiction.

When the hegemonial power does not seek to conquer other states, but merelyto protect its favored position, other states may benefit as well. The Pax Britannicais often celebrated. Charles Kindleberger has argued that during the last century


international economic systems with one leader have been more stable than othersystems, and they have been associated with greater prosperity.8 In the nineteenthcentury the financial strength of Great Britain provided the basis for a monetarysystem that was centered principally, although not entirely, on London. From WorldWar II through the 1960s, the economic preponderance of the United Statesenabled it to manage monetary relations among noncommunist countries throughthe Bretton Woods system. By contrast, as we shall see in more detail later, theunhappy international monetary experience of the interwar period occurred whenthe United States was unwilling to exercise strong leadership and Britain was unableto do so.9

Hegemonial powers do not, therefore, always exploit secondary powers econom-ically. During the heyday of the sterling standard, industrial production in France,Germany, Russia, and the United States increased from 50 percent to 400 percentfaster than in Britain.10 Although the United States dominated the monetarysystem of the postwar period, Europe and Japan grew more rapidly than it did. Evenso severe a critic of American hegemony as David Calleo admits that “it was difficultto argue that the dollar system was causing economic harm to its members.”11

Why then do hegemonial systems and their corresponding economic regimescollapse? War or major shifts in the overall balance of power are the dramatic causes.But these systems may also be undermined by the very economic processes theyencourage. Ironically, the benefits of a hegemonial system, and the extent towhich they are shared, may bring about its collapse. As their economic powerincreases, secondary states change their assumptions. No longer do they have toaccept a one-sided dependence which, no matter how prosperous, adversely affectsgovernmental autonomy and political status. As autonomy and status becomepossible, these values are taken from the closet of “desirable but unrealistic goals.”At least for some leaders and some countries—such as France in the 1920s and1960s—prosperity is no longer enough.12

Thus, as the rule-making and rule-enforcing powers of the hegemonic statebegin to erode, the policies of secondary states are likely to change. But so are thepolicies of the hegemonic state. An atmosphere of crisis and a proliferation of ad hocpolicy measures will seem not only undignified but unsettling to many. Dissenterswill begin to wonder about the costs of leadership. Further, this leadership will lessand less appear to guarantee economic and political objectives, as other statesbecome more assertive. The renewed emphasis of these secondary governments onstatus and autonomy adds a further complication, since these values have a zero-sumconnotation that is much less pronounced where economic values are involved.More status for secondary states means less for the dominant power; increases inweaker powers’ autonomy bring concomitant declines in the positive influence ofthe system’s leader.

Thus the systemic orientation natural to a hegemonial power—which identifiesits interests with those of the system it manages—is challenged by a more national-istic perspective at home and abroad. Bilateralism and autarky, formerly rejectedas inefficient, are once again recommended. Their adherents stress the benefits ofeconomic security, or risk aversion. When power seems to ensure that risks are


minimal, this argument carries little weight; but when cracks appear in the hegemonialconstruction, prudence counsels what efficiency formerly proscribed.

When this point is reached on both sides, the hegemonic equilibrium has beenbroken and a spiral of action and counteraction may set in. As the system changes,assumptions change; considerations of risk aversion on one side and greater independ-ence on the other counsel policies with less international or less systemic implications.The uncertainty thus created may be difficult to stop; a cycle of disintegration canreadily set in.

From a traditional perspective, this portrait of economic processes erodingoverall hegemony has a certain appeal. By adding a few assumptions, it providesan explanation based on the overall power structure that accounts for changes ineconomic regimes, despite the absence of major war or major shifts in the balance ofpower. Applying this model to the post-war period, one can argue that internationaleconomic regimes that accompanied the “Imperial Republic” or the “AmericanEmpire” are collapsing due to the “decline of American power.”13

Limitations of an Overall Structure ExplanationCarefully defined, the concept of hegemony and analysis of its erosion by economicprocesses can help to explain regime change. But this overall structure explanationis more ambiguous than it first appears, and can lead to facile descriptions of change.We must specify what resources are considered effective in establishing hegemonicpower, and to what range of phenomena it is meant to apply.

The simplest and most parsimonious version of the eroding hegemony thesiswould be that international economic regimes directly reflect politico-militarypatterns of capability: high politics dominates low politics. Changes in internationaleconomic relations are explained by shifts in military power. This simple versionexplained the broad features of the Cold War economic order, particularly its basicdivisions. Although Soviet or Chinese purchases and sales could affect worldmarkets, these planned economies were separate enough that it was more accurateto think of three distinct economic systems, corresponding to the three major (butunequal) sources of politico-military power.

Yet the most parsimonious explanation breaks down when one moves fromexplaining overall structure to explaining change. The United States’ position inthe world economy, and its dominance in policymaking, both within the indus-trialized areas and with the Third World, clearly declined between 1950 and 1976.Yet during this period the United States remained, militarily, the most powerfulstate in the world; and its military lead over its major economic partners (Japan,Canada, and Europe) was steadily maintained if not increased.

Thus, although the distribution of military power affects the internationaleconomic order, by itself it provides only a small part of the explanation. Threeother major factors must be added for an adequate overall structure explanation,thus reducing its simplicity but increasing its fit with the facts of postwar change ininternational economic regimes: (1) changes in perceptions of the threat of militaryaggression; (2) changes in the relative economic strength of the United States and its


trading and investment partners; and (3) changes in hierarchical patterns involvingEurope and the Third World.

Concern about a communist military threat helped stimulate Americans tomake short-run economic sacrifices (that is, to exercise leadership) to develop andpreserve the liberal postwar economic regimes that contributed to European andJapanese recovery. Many of the major advances in international economic rela-tions came during the long period of maximum Cold War tension between 1947(the Truman Doctrine) and 1963 (the Test Ban Treaty). In these years, theInternational Monetary Fund (IMF), World Bank (IBRD), General Agreement onTariffs and Trade (GATT), and Organization for Economic Cooperation andDevelopment (OECD) began to function; currency convertibility was achievedand major tariff cuts implemented; and the Common Market was established.United States security leadership was prized by its allies, and the Americanperception of high threat from the Soviet Union encouraged United Statespolicymakers to grant various economic concessions to the Europeans and theJapanese. The sharp reductions in perceived threats in the early 1970s havecertainly helped to reduce the United States’ ability subtly to translate its militaryleadership of the alliance into economic leadership without resorting to overt andhighly resented linkages. American allies became less willing to act as juniorpartners once they perceived the external threat as diminished. At the same time,American willingness to accept economic discrimination or unfavorable exchangerates was also declining.

These changes in perceptions were reinforced by increases in European andJapanese economic capabilities relative to those of the United States. In the earlypostwar period, Europe was largely supine, and although it was able to bargain andresist on some issues, it complied with United States leadership within an overalleconomic structure. Later, the tremendous European economic recovery and theconfidence it gave, at least on economic issues, provide the primary explanation forthe Dillon Round tariff cuts, currency convertibility and subsequent reducedreliance on the dollar, and the construction of the Common Market. The lattersteps were motivated by a desire to boost the political as well as economic strengthof Europe, so that it could better stand on its own against the Soviet Union (andlater, the United States).

This situation created an opportunity for linkage and trading-off of militaryand economic advantages, which became more tempting to the United Sates as itseconomic preponderance eroded. It is worth noting that the disruption of theeconomic order was not caused by an erosion of American military power in the1960s, but by a decline in American concern that such disruption would threatenvital security relationships.

The third factor needed to fit a theory of eroding hegemony to the facts ofchange lies not in American relations with other countries, but in the relationsof Europe to the Third World.14 Before 1960, most of Africa, along with othernow independent countries, remained under colonial rule. Since then, about fiftycountries have become independent, and over time these former colonies have


become more assertive. After the abortive British-French Suez invasion of 1956and the withdrawal of most British forces east of Suez in the late 1960s, itwas obvious that Europe would no longer play a major role in controlling eventsoutside that continent. The erosion of European colonial hegemony, notAmerican military power, added to the complexity of world politics and tothe pressure on the United States as well as the other industrialized countries foreconomic regime change.

In short, the theory of eroding hegemony, though a useful part of the explana-tion of postwar economic regime change, is not as neat an overall structure explana-tion as it first appeared to be. Nor is it a very good basis for prediction. The apparentinevitability of decline, portrayed by the eroding hegemony model (even with thesequalifications), may to some extent be an illusion, precisely because of the inade-quacy of its assumptions about domestic politics, interests, and issues. In the leadingstate, interests in maintaining systemic leadership and in paying the cost will persist,particularly among multinational corporations based there, the financial elite, andgovernmental bureaucracies charged with maintaining good relations with allies. Inthe governments of secondary powers, as well, no firm consensus is to be expected.Dependency may provide comforts for some parties, necessities for others. Theremay be coalitions across national boundaries for preserving international economicregimes. Regime maintenance may not require military hegemony, but may rest onvested interests in several countries. Foreign policy may respond to particular interests—which sometimes may favor regime maintenance.

The argument about eroding hegemony also suffers from its disinclination todifferentiate among issue areas. Yet dominant rule-making power in one area doesnot necessarily imply effective control over other areas as well. American domi-nance eroded more rapidly in the 1970s on petroleum issues than it did on issues ofinternational monetary policy or trade in manufactured products. Where the use orthreat of force is ineffective, it will be more difficult for a major power, in whatwould formerly have been a hegemonial position across the board, to influence pol-icy in one issue area by using resources not specific to that area. This difficulty wasparticularly evident in the petroleum crisis of 1973–74: although the United Stateswas much stronger militarily and economically than the Middle Eastern oil producers,it was unable to persuade them to reduce oil prices.

Finally, the eroding hegemony argument ignores the complications introducedby multiple channels of contact among societies—in the form of multinational firmsand other transnational actors, or informal, transgovernmental contacts amongbureaucracies. Some of the domestic political reactions against open, internationalistpolicy result largely from the real or perceived effects of foreign investments bymultinational firms. In their activities abroad, multinationals are likely to increasethe appearance of United States dominance, due to their visibility and their role ascarriers of American popular culture, but it is at best uncertain whether they reallycontribute to United States power overseas.15 Thus they introduce new ambiguitiesinto the calculation of power, and possible disjunctions between the reality of powerand its appearance.


ISSUE STRUCTURE

The elegance of the overall structure model derives from its basis on a simple inter-pretation of structure as the distribution of power capabilities, in the aggregate,among states. On the basis of these distributions, it promises significant predictionsabout patterns of behavior.16 However, one must assume that there is a hierarchy ofissues, with military security at the top, and that force is usable, since otherwise onecould find very different patterns of politics, and regimes, for different issue areas.The overall structure explanation assumes that power, like water, will find a com-mon level: discrepancies between which states are dominant on one issue and whichpredominate on others will be eliminated in important cases by linkages drawn bypowerful states through the use or threat of force. Insofar as an issue is relevant tomilitary security the most powerful states, in the aggregate, will be able to control it.

These assumptions can be challenged. After 1973, for instance, it became obvi-ous that power in petroleum issues was distributed very differently than in otherissue areas of world politics, and the discrepancy has continued to persist up to thiswriting. To explain such a situation, one could turn to an issue structure model inwhich force is usable only at high cost, and military security is not at the top of aclear hierarchy of issues for governments. From these assumptions the issue structuremodel infers that linkages will not be drawn regularly and effectively among issueareas. Power resources, it holds, cannot under these circumstances easily be trans-ferred. Power will not be fungible, as in the overall structure model; military capa-bilities will not be effective in economic issues, and economic capabilities relevantto one area may not be relevant to another.

Observation of contemporary world politics lends general plausibility to thisformulation. It is clear that different issue areas often have different politicalstructures that may be more or less insulated from the overall distribution ofeconomic and military capabilities. They differ greatly in their domestic politics,in their characteristic patterns of politicization, and in the interest groups that areactive. For instance, small numbers of bankers, who control huge financial institu-tions, are very influential on international monetary issues; whereas influence ontrade is much more broadly shared.17 In oceans politics the pattern is complex,with coastal fishermen, distant-water fishermen, scientists, oil and hard mineralscompanies, and navies all involved. Saudi Arabia, Libya, Iran, and Kuwait may bevery important on petroleum issues but virtually inconsequential on questionsrelating to the international regime for the oceans, world food problems, or GATTrules for trade in manufactured products. Likewise a major food producer such asAustralia or an important trading country such as Sweden may not play a signifi-cant role on petroleum issues.

Yet, though issue structuralism differs in important ways from the traditionaloverall structure explanations, it has a similar form of argument about regimechange: the strong states (in an issue area) will make the rules. A basic assumptionof the issue structure model, however, is that although states may be tempted todraw linkages among issues, such linkages will be generally unsuccessful. The premiseof issue structuralism is that power resources in one issue area lose some or all of their

Issue Structure 43

effectiveness when applied to others. Thus, unlike the overall structure explanation,issue structuralism does not predict congruence of power across issues. On thewhole, then, analysis of politics will have to be conducted by issue area. Within eachissue area one posits that states will pursue their relatively coherent self-interestsand that stronger states in the issue system will dominate weaker ones and deter-mine the rules of the game.

Issue structuralism thus is capable of generating clear predictions for particularsituations. Yet as a theory, it is less powerful than the overall structure explanationbecause the analyst needs more information: he or she needs to know not only theoverall structure of military, or military and economic, power; but how that power isdistributed by issue area. Although it is less powerful, issue structuralist theory ismore discriminating, since it can distinguish among issue areas that are crucial in ana-lyzing much of contemporary world politics, particularly the politics of internationaleconomic relations. The two assumptions of the complex interdependence modelthat it incorporates therefore increase the closeness of fit of its predictions withsome aspects of reality, at only partial sacrifice of predictive power.

Like the overall structure explanation, an issue structure explanation of thepolitics of economic regime change in a specific issue system, such as oceans ormoney, distinguishes between activity taking place within a regime and activitydesigned to influence the development of a new regime. In the former case, theinternational regime for the issue is regarded as legitimate by major actors, althoughminor disagreements may exist. National policy options are constrained by theregime. Politics takes place within the ground rules laid down by the regime, andgenerally is directed toward small advantages, favorable adjustments, or exceptionsto the rules. Politics within the General Agreement on Tariffs and Trade (GATT)during much of the 1950s and 1960s conformed to this picture. Participantsaccepted GATT rules but attempted to secure waivers for specific interests of theirown.18 Within the European Economic Community, the “politics of regionalimplementation” exhibits similar characteristics: the legitimacy of the rules is notchallenged, but the members may seek to bend or delay them.19 Governmentsattempt to take advantage of asymmetries in sensitivity, but do not manipulatevulnerabilities very much—since the regime itself constrains policy change.

In rule-making (the second aspect of political activity in an issue area), what ischallenged is not merely a set of effects implied by rules but the rules themselves.The nature of the regime is questioned by major participants, and the politicalstruggle focuses on whether, and in what ways, the regime will be restructured. Thusthe concept of vulnerability interdependence is most appropriate here.

This distinction is important for issue structure explanations because powerresources that provide influence in political activity often differ with the two aspectsof the problem. Where the rules are taken for granted, they may create asymmetriesin sensitivity interdependence. For instance, as long as traditional international lawrequiring prompt and adequate compensation for the nationalization of foreigninvestment were in effect, small host countries with weak economies and adminis-trations tended to be more sensitive to the decisions of foreign investors (and thehome governments) than the investors were to their decisions.


When the rules are questioned, or the international regime is changed unilater-ally, the principles that channeled sensitivity interdependence no longer conferpower benefits on the actors that had benefited by them. At this point, politicsbegins to reflect different power resources, relative vulnerability, not sensitivity, orwhat can be considered as the underlying power structure in the issue area. Onforeign investment issues, for instance, governments gained power as inhibitionsagainst expropriation declined. The power resources that affect rule-making allowtheir holders to implement alternatives and to challenge assumptions about the cur-rent use of influence in an issue. Issue structuralism allows us to predict that whenthere is great incongruity in an issue area between the distribution of power in theunderlying structure, and its distribution in current use, there will be pressures forregime change.

Both aspects of power are important, but for the issue structure model theunderlying power structure is more basic, since breaking or creating regimes meanschanging the rules that channel the patterns of sensitivity interdependence. To aconsiderable extent, regime change occurs because of the difference between theinfluence and benefits under an existing regime and the expectations of dissatisfiedstates about the effects of new rules. When there is an incongruity between theinfluence of a state under current use rules, and its underlying sources of power tochange the rules, issue structuralism predicts sharp rather than gradual regimechange. For example, in 1971 the incongruity between American sensitivity todeclining monetary reserves (under rules about fixed exchange rates) and its under-lying rule-making power (based on the importance that American GNP conferredon the dollar) led to a sharp break of regime.

Limitations of Structural ExplanationsIssue structuralism is often useful when costliness of force or the absence of a majorsecurity concern limits the validity of explanations based on the overall power struc-ture. But to the extent that linkages of issues are successful, the explanatory value ofthe issue structure model is reduced, since political outcomes in particular issue areaswill no longer be accounted for simply by political resources in those areas.Moreover, in some situations linkages may come not from states with great overallpower, but from poor, weak states. In the bargaining over the law of the sea, forexample, much of the linkage has come “from below,” as poor, weak states find it totheir advantage in conference diplomacy. This linkage from below is an anomalywhich neither structural model adequately explains.

Another problem with both structural explanations is their exclusive focus onthe power capabilities of states; they ignore domestic and transnational politicalactors. We have already shown how this focus limits the overall structure explana-tion of postwar regime change. That limitation is not overcome by an issuespecificformulation of the structural argument. Some regimes—for example in trade amongmajor industrial countries—have persisted despite shifts in the underlying powerstructure; others—as we shall see in our study of oceans policy—have changeddespite continuity of power.

Issue Structure 45

More generally, understanding the changing regimes that govern internationalinterdependence requires an understanding of both structure and process.International structure explanations are generally inadequate unless coupled withan account of political process. In terms of the distinction developed in the previouschapter, there is likely to be a discrepancy between the structure of power asresources (whether military as in a stark realist formulation or economic as in theissue structure approach), and power as control over outcomes and measured by thepattern of outcomes. The translation from capabilities to outcomes depends onthe political process. Skill in political bargaining affects the translation. States withintense preferences and coherent positions will bargain more effectively than statesconstrained by domestic and transnational actors. And even states with coherentpositions may find their bargaining position weakened by the institutions and pro-cedures that characterize a given regime, as Figure 3.1 illustrates.

In the simplest (and least interesting) structural explanations, a shift of overallor issue-specific capabilities (for example, caused by a war) leads directly to regimechange. In the more sophisticated structural explanations indicated in the diagram,a regime creates a bargaining process, which leads to a pattern of outcomes. If thatpattern is incongruous with the overall power structure (or in the issue-specificmodel, the underlying power structure in the issue area) and is intolerable to thestrongest states, there will be a regime change to reduce the incongruity. The struc-tural approach views the regime and the bargaining process as having no autonomy.The validity of that assumption depends on the conditions of world politics that weexamined in the last chapter.

In conclusion, our criticism of the structural explanations does not mean thatwe reject them. On the contrary, their simplicity makes them the best startingpoint for analyzing regime change. Our care in elaborating the structural models ofeconomic regime change—including the traditional model, whose proponents have

Power capabilities(overall or

issue-specific)

RegimeBargaining

processRegimechange

Power overoutcomes (pattern

of outcomes)

If pattern of outcomesis intolerable to state withoverall (or issue) power

FIGURE 3.1 Structural models of regime change


often portrayed it as universally valid but neglected to relate it carefully to economicregime change—indicates that we believe they have some explanatory power undercertain explicitly stated conditions. Our purpose is not to demonstrate the incor-rectness of international structural theory but to indicate that, even when carefullyreformulated, it provides only a partial explanation.

AN INTERNATIONAL ORGANIZATION MODEL

One way to think of the structure of world politics is in terms of the distribution ofcapabilities (overall or within issue areas) among the major actors of world politics.This is the concept of structure used in the overall structure and issue structuremodels. It is also possible, however, to define another kind of structure. One canthink of governments as linked not merely by formal relations between foreignoffices but also by intergovernmental and transgovernmental ties at many levels—from heads of government on down. These ties between governments may be rein-forced by norms prescribing behavior in particular situations, and in some cases byformal institutions. We use the term international organization to refer to these multi-level linkages, norms, and institutions. International organization in this sense isanother type of world political structure.

In our international organization model, these networks, norms, and institu-tions are important independent factors for explaining regime change. One mayeven have international organization of Canadian-American relations even though,as we shall see in Chapter 7, formal international institutions play only a minor rolein the relationship. International organization in the broad sense of networks,norms, and institutions includes the norms associated with specific internationalregimes, but it is a broader category than regime, because it also includes patterns ofelite networks and (if relevant) formal institutions. Thus, the Bretton Woods inter-national monetary regime prescribed countries’ financial dealings with one another;but the international organization of the monetary issue area during that period alsoincluded formal organizations such as the International Monetary Fund andnetworks of ties among national treasures and central banks. And this internationalorganization of the monetary issue area existed within a broader pattern of interna-tional organization, including both the formal institutions of the United Nationsand informal networks of ties among governments, particularly among governmentsof advanced industrial societies belonging to the OECD.

The international organization model assumes that a set of networks, norms,and institutions, once established, will be difficult either to eradicate or drasti-cally rearrange. Even governments with superior capabilities—overall or withinthe issue area—will find it hard to work their will when it conflicts with estab-lished patterns of behavior within existing networks and institutions. Underthese conditions the predictions of overall structure or issue structure theorieswill be incorrect: regimes will not become congruent with underlying patterns ofstate capabilities, because international organizations as defined above will standin the way.

An International Organization Model 47

Thus, the international organization model will help to account for failures of thebasic structural models of regime change. Regimes are established and organized inconformity with distributions of capabilities, but subsequently the relevant networks,norms, and institutions will themselves influence actors’ abilities to use these capabili-ties. As time progresses, the underlying capabilities of states will become increasinglypoor predictors of the characteristics of international regimes. Power over outcomeswill be conferred by organizationally dependent capabilities, such as voting power, abilityto form coalitions, and control of elite networks: that is, by capabilities that are affectedby the norms, networks, and institutions associated with international organization aswe have defined it. In the United Nations General Assembly, for instance, one cannotpredict resolutions correctly by asserting that the most powerful states in the interna-tional system (such as the United States) will generally prevail. Instead, one has toexamine governments’ abilities to influence, and benefit by, the one-state-one-votesystem by which the formal decisions of the assembly are made.

Thus the international organization model helps to resolve some of the puzzlesthat could arise for someone who believes in the overall structure or issue structuremodel. Some regimes may not change as rapidly as underlying power capabilities; forthese regimes and others, we will be unable to predict patterns of outcomes simplyfrom a knowledge of the distribution of capabilities among governments. The inter-national organization model provides a dynamic of regime change, as well as anexplanation, in certain instances, of inertia. As we noted before, international organ-ization in our sense provides the context within which regimes operate. Internationalorganization—either in issues quite apart from the issue area of a regime, or withinthat issue area—may affect the regime. The networks, norms, and institutions of theUnited Nations, for instance, have affected the international trade regime, particu-larly since the formation of the United Nations Conference on Trade andDevelopment in 1964. Similarly, the practices of the United Nations system affectedthe influence of various governments over General Assembly resolutions demandinga new international economic order. Such an order, developed through the UnitedNations, would be likely to affect the international trade regime, and, more impor-tant, to influence the IMFcentered international trade regime and perhaps eventuallyto stimulate the development of an international regime to control direct invest-ment. The general point is clear: international regimes can be changed by decisionsthat are themselves affected by international organization in our sense.

Figure 3.2 is a diagram of the international organization model. Existing normsand networks, as well as underlying capabilities, influence organizationally depend-ent capabilities, which in turn affect outcomes. If one considers only the solid linesin the diagram, this system could be self-perpetuating, with considerable stability,yet not determined entirely by underlying patterns of capabilities. The dotted lineindicates the major source of change: other networks, norms, and institutions mayinterfere with the specific organizational configuration under consideration, thusaffecting the nature of the regime. As we shall see in the next chapters, the rules,norms, and procedures of the United Nations have had such an effect on regimechange in the oceans issue area: the organizational context within which decisionswere made greatly affected the rules about the use of oceans space and resources.


Although the international organization model includes important factors thatare ignored or downplayed by the basic structural models, it has some significant limi-tations of its own. It is more complicated than the basic structural approaches, requir-ing more information. It does not predict how international regimes will change froma single variable such as international structure. Indeed, its focus on the politicalprocesses associated with international organization implies that actors’ strategies,and their cleverness in implementing them, can substantially affect the evolution ofinternational regimes. Furthermore, it is much less deterministic than the basic struc-tural models, leaving wide latitude for choice, decision, and multiple-level bargaining.

The factors on which the international organization model depends are alsomore temporary and reversible than those of the basic structural models. If powerfulgovernments decide to destroy the existing regimes, and have the determination aswell as the ability to do so, the regimes and their associated organizations will nolonger have lives of their own. The international organization model postulates thatthe costs of destroying a regime will be high when well-integrated elite networksexist on many levels among countries. Nevertheless, the costs of an adverse regimecould become so great that some states would resolve to destroy it even though thatmeant disrupting those networks. At this point the basic structural models wouldbecome more relevant than the international organization model.

We expect that under realist conditions, as described in Chapter 2, the underly-ing distribution of power is likely to be dominant (particularly since force is usable),and the international organization model is not likely to add significantly to expla-nations of regime change. Under complex interdependence, however, we expectinternational organizational norms and procedures and their associated politicalprocesses to affect patterns of regime change.

Underlying capabilities

(issue or overall)

(Effect on regime)

Organizationallydependentcapabilities

Bargaining(in complex

interdependencemodea)

Existingnorms andnetworksa

Otherorganizations

Outcomes

FIGURE 3.2 An international organization model of regime changeaAt the beginning, the organization of a regime is affected by underlying capabilities of states,but not on a continuous basis.

Combining Explanations 49

Please remember that the international organization model is only likely toapply under complex interdependence conditions, and that even then, its predic-tions could be rendered invalid by the actions of governments determined to exer-cise their underlying power to change regimes. The latter point can be related to ourdiscussion in Chapter 1 of sensitivity and vulnerability interdependence as powerresources. The international organization model is based on the assumption that theregime will be stable; that is, policy changes disrupting it will not be possible. Actorswill manipulate each other’s sensitivity dependence for their own gain; and theymay make marginal policy shifts to improve their vulnerability positions. But thereis a limit to their manipulation of vulnerability interdependence; if they change policytoo much, the regime itself will be challenged and destroyed.

The validity of the model depends on its assumption that actors will not destroythe regime by attempting to take advantage of one another’s vulnerability depend-ence. If, on the contrary, this occurs, underlying power resources within issue areasor overall will once again become most important, and structural models will be bet-ter guides than the international organization model to regime change. The twostructural models therefore dominate the international model in the same way thatvulnerability interdependence dominates sensitivity interdependence as a powerresource. Above a certain level of conflict the international organization model andsensitivity interdependence become largely irrelevant.

COMBINING EXPLANATIONS

No single model is likely adequate to explain world politics. Conditions vary toogreatly. You may therefore be tempted to say that everything is relevant, and indis-criminately combine all of the factors we have discussed. By doing so, you would begthe questions, however, of which factors are most important and how they should becombined. You must also abandon hope for simpler explanations, even when theyare appropriate. All problems would be approached at the same level of complexity.

Because of the drawbacks of a single complex synthesis, it is better to seek expla-nation with simple models and add complexity as necessary. For economic issues, wecan begin with the economic process model, which ignores international politicalstructure entirely and predicts regime change on the basis of technological changeand growing economic interdependence. If such a model really explains behavior,we can omit all the complexities of determining the relevant structure of power.

We believe that this will rarely, if ever, be successful. The next analytical step,therefore, will be to add politics in the simplest possible way by seeing whether theoverall structure model, alone or in conjunction with the economic process model,can explain regime change. Using the overall structure model, we expect a tendencytoward congruence across issues. We would expect, therefore, that actors strong onmilitary-security, high politics issues would create linkages to important economicissues if they found themselves in weak positions on the latter.

If our arguments in this and the previous chapter are correct, however, even thisapproach will often be insufficient. The next step, therefore, would be to turn to an


issue structure approach. Using this model, we assume that power resources are quitespecific by issue area and linkage will be slight. Within issue areas, power resourcesrelated to vulnerability will dominate resources relevant to sensitivity within aregime. When the regime produces outcomes contrary to what we would expect onthe basis of fundamental power resources, we would expect states powerful at thevulnerability level to force changes in the regime.

Sometimes even this refinement will not explain regime change, and one willhave to turn to the international organization model and examine how norms,networks, and institutions benefit some actors rather than others—in setting theagenda, in creating presumptions or patterns of behavior that make certain bureau-cracies within governments especially active on particular issues. We will also needto ask how international regimes acquire an inertial force, which allows them topersist after the conditions that brought them into being have disappeared.

We shall show in later chapters that each model helps in explaining regimechange or persistence during part of the time for at least one of our four cases(oceans, money, and Canadian-American and Australian-American relations). Insome cases we shall need to combine two or three models for a full explanation. Inseveral cases we shall require a sequence of models. One model may apply quite wellfor one period, but poorly for another. It would not be wise to develop a single amal-gamated model; but under different conditions, different combinations of the modelswill provide the best explanations of international regime change and politicaloutcomes.

Our ability to combine models depends, however, on a clear understanding oftheir differences. Table 3.1 summarizes the assumptions of the models about threekey questions. For the structural model, underlying power can be translated intochanges in international regimes without high translation costs. Thus the states

TABLE 3.1 Some Key Assumptions of the Four Models of Regime Change

Overall structure

Issue structure

Internationalorganization

Economicsensitivity

Can underlying sources of power be translated at low cost into changes in international regimes?

Yes Yes No –

Are the costs of disrupting policy networks high?

No No Yes –

Are the economic costs of disrupting patterns of economicinterdependence high?

(No)a (No) – Yes

a Parentheses indicate an implied answer

Combining Explanations 51

with significant power capabilities, overall or within issue areas, will determine thenature of international regimes. For the international organization model, this is notthe case; furthermore; in this model the costs of disrupting regimes and associatedpolicy networks will be so high that regimes will tend to persist even when their pat-terns of outcomes are not in line with underlying power capabilities. The economicprocess model argues that the economic costs of disrupting interdependence will begreat, and that under high economic sensitivity states will therefore be reluctant todisrupt international regimes.

We are now ready to consider our case studies. Before proceeding, however, wemust state two caveats. First, the case studies are not representative of all of worldpolitics. We chose them for theoretical reasons that will be explained in Parts II and III.Second, as we said at the beginning of Chapter 2, none of our models is expected toapply universally. We anticipate that the closer a situation is to complex interde-pendence, the more the issue structure and international organization models willapply, and the less accurate will be the overall structure model. When realist condi-tions pertain, the reverse is expected. The economic process model needs politicalspecification before it can be an accurate guide.

If the overall power structure in world politics determined patterns of regimechange, we would not need to have introduced such a complex set of models. Worldpolitics would be like a single great lake: often turbulent, but with a uniform level.Changes in the amount of water flowing into one part of the lake quickly haveeffects on the whole body of water. We assume, however, that world politics is highlydifferentiated rather than homogeneous. The appropriate image for our analysis istherefore not a single lake, but a river divided by sets of dikes, dams, and locks,which separate and connect various levels and “lakes.” We have developed our modelsto attain a better understanding of the heights and strengths of the various types ofdikes, dams, and locks in world politics, and to learn more about their architects,engineers, and lock-keepers, and the fees they charge.


53

� CHAPTER 4 THE POLITICS OF OCEANS AND MONEY: HISTORICALOVERVIEWThe International Monetary Issue AreaThe Oceans Issue AreaConclusion

� CHAPTER 5 COMPLEX INTERDEPENDENCE IN OCEANS AND MONEYThe Conditions of Complex InterdependenceThe Political Process in Money and OceansConclusion

� CHAPTER 6 THE POLITICS OF RULE-MAKING IN OCEANS AND MONEYEconomic Processes and Regime ChangeOverall Structure and Regime ChangeIssue Structure and Regime ChangeInternational Organization and Regime ChangeLimits of Systemic Explanations: Domestic Politics andLeadershipConclusion

Regime Change in Oceans and Money

IIPART


55

The Pax Britannica of the nineteenth century is sometimes seen as the golden ageof international order. International economic interdependence was governed byregimes that were largely established and enforced by Great Britain. Despite themythology of laissez-faire, Britain applied military force when necessary to maintainsuch norms as free trade and freedom of the seas. But the regimes were generallyacceptable to other major powers. Naval power allowed Britain to dominate theworld’s peripheries, though the balance of power in Europe was multipolar. In thewords of an important British memorandum, the regimes she policed were “closelyidentified with primary and vital interests of a majority, or as many as possible,of the other nations [who were thus] less apprehensive of naval supremacy inthe hands of a free trade England than they would be in the face of a predominantprotectionist Power.”1

Two of the key issues areas in the Pax Britannica were monetary affairs andoceans space and resources. We have chosen these two for detailed exploration andcomparison in the next three chapters because their continued importance from thenineteenth century to the present allows us to test the applicability of our models ofregime change under changing political and economic conditions. We shall firstdescribe and then explain changes in international regimes for the oceans and mon-etary issues between World War I and the present. We expect no single explanatorymodel or combination of models to be superior for that entire period. Such dramaticchanges have taken place in communication and transportation patterns, oceanshipping, fishing, and mining activity, and in international money marketsand banking systems, that one would expect equally striking changes in politicalbehavior. Indeed, we began this study believing that our conditions of complexinterdependence would be more closely approximated in the 1960s and 1970sthan earlier, and that traditional models of world politics would therefore becomeless relevant over time. As we shall see in Chapter 5, to some extent this is thecase—but with important qualifications.

The Politics of Oceans andMoney: Historical Overview

4CHAPTER

55

56 Chapter 4 The Politics of Oceans and Money: Historical Overview

Except for the overall structure approach, our models predict major differences inpatterns of politics among issue areas as well as, over time, within them. Thus,we chose international monetary and oceans issues, not just for their intrinsicimportance, but for their differences, which suggested to us that the patterns of changefor their respective regimes would also be quite different. Both issue areas seemed tomeet the conditions of complex interdependence to some extent, yet there weresignificant contrasts. In both, multiple channels of contact exist between societies,and transnational actors are prominent. Force, however, plays a greater direct role inoceans questions than in money. Navies, after all, still patrol the seas, and occasionallyattempt to reinforce national jurisdictional claims. But despite the role of force, oceansissues are more diverse and less closely linked, functionally, than internationalmonetary issues. However, political actors may see relationships among oceans issuesand may therefore group them. For instance, there is very little direct functionalrelationship between fishing rights of coastal and distant-water states and rules foraccess to deep-water minerals on the seabed; yet in conference diplomacy they wereincreasingly linked together as oceans policy issues. Finally, the issues differ in thegeographical fixedness of the goods involved. Money is one of the most fungible ofitems; and banks, businesses, and governments have well-developed networksmoving it rapidly across borders. Oceans policy issues largely involve questions of legaljurisdiction over resources that are specific to particular geographical areas.

The applicability of the conditions of complex interdependence to the two issueareas will be explored in Chapter 5. In this chapter we shall describe major events inoceans and monetary affairs between 1920 and 1975, emphasizing changes in thenature of the international regimes for these issue areas.

Before we can analyze political processes by issue area, we must define “issue”;that task is more difficult than it may at first appear. Policy issues are not the sameas objective problems, such as whether life in the oceans is being destroyed bypollution, or whether the international monetary system can finance growingvolumes of international trade and investment. Issues are problems about whichpolicymakers are concerned, and which they believe are relevant to public policy.Thus a policy issue is partly subjective. The problem must be perceived as relevantto policy by people with influence over policy.

Since issues are defined subjectively, so are issue areas. When the governmentsactive on a set of issues see them as closely interdependent, and deal with them col-lectively, we call that set of issues an issue area.* When we do so, we are making astatement about actors’ beliefs and behavior, not about the objective reality of theproblems themselves. We noted earlier that international monetary issues are muchmore closely linked functionally than oceans issues, which are connected largely bythe perceptions of actors that issues involving oceans should be treated together.

*This definition is not meant to imply that the political analyst can ignore objective reality. Presumably,political actors who misperceive reality are not likely to achieve their goals unless they adjust their per-ceptions. In the long run, some congruence can be expected between perceptions and reality. Nevertheless, itis on the basis of subjective perceptions, not on the basis of an objective reality that no one understands in adefinitive way, that actions are taken. For a given situation, we begin with perceptions; to predict outcomes, orfuture perceptions, it may be highly useful to have further information about the reality being perceived.

The International Monetary Issue Area 57

Yet as long as oceans issues are considered collectively, an oceans issue area in ourterm exists.

It is difficult precisely to define the boundaries of an issue area; this difficulty iscomplicated by the fact that these boundaries can change over time as issues, andtheir groupings, change. We therefore begin our discussions of the internationalmonetary issue area, and the oceans policy issue area, by discussing their boundariesas we perceive them.

THE INTERNATIONAL MONETARY ISSUE AREA

People concerned with international monetary affairs frequently assume thateveryone knows the boundaries of their subject, so they often do not define the issuearea involved. To say that international financial affairs are being discussed is takenas definition enough. As one might expect, this lack of attention to definitionreflects a great consensus on what is involved in this area, and a considerableagreement, therefore, on its boundaries. Richard Cooper takes the major dimensionsof an international monetary regime to be: “(1) the role of exchange rates, (2) thenature of the reserve asset(s), and (3) the degree of control of internationalcapital movements.”2 Few authorities would disagree.* Within an internationalmonetary regime, however, other issues can arise, in particular, problems of liquidity,adjustment, and confidence.**

It is very important to keep in mind this distinction between issues that focus onwhat kind of international monetary regime should exist, and those centering onrelationships within a given regime. Discussions of the extent to which exchangerates should fluctuate, or the role of gold as a monetary asset, clearly belong in theformer category; problems of whether the sterling-franc rate was correct in the late1920s, or whether enough liquidity existed in the early 1960s, fall into the latter set.

*For instance, under the Bretton Woods regime, which was in operation (with some qualifications) dur-ing the 1960s, United States dollars and gold were the major reserve assets; exchange rates were fixed and werenot to deviate more than 1 percent from par except when official devaluations took place; and internationalcapital movements were, for the most part, unrestricted (although several exceptions could be noted). Sincethe late 1960s, Special Drawing Rights (SDRs) created by intergovernmental agreement have become reserveassets in addition to gold and foreign exchange (which refers to holdings by a given country of other countries’convertible currencies—currencies that can be exchanged for other currencies, if not for gold). Exchange ratesamong major currencies are usually not fixed, and therefore fluctuate daily; and on the whole, internationalcapital movements are still unrestricted.

**Conventionally, problems arising with international monetary regimes are classified under these head-ings. Liquidity refers to the value of international money (gold, foreign exchange, and now SDRs) in circula-tion in the system. If there is too little liquidity, international financial flows may be unduly restricted; if thereis too much, inflationary tendencies may manifest themselves. Adjustment refers to ways in which countriescan change the relationships of their economies to the outside world to more nearly balance their payments.Adjustment measures can be either internal (such as domestic “austerity” programs) or external (such aschanges in exchange rates). Confidence refers to the attitudes of holders of liquid financial resources towardcurrencies: if confidence in the current value of a currency is low, it is likely to be sold on balance by privateparties, thus putting downward pressure on its value. For a full discussion of international monetary relationsin the 1960s, see Richard N. Cooper, The Economics of Interdependence (New York: McGraw-Hill, for theCouncil on Foreign Relations, 1968).


Although the distinction is not perfect, we emphasize questions of regime changerather than details of the political process within an established regime.

We define the international monetary issue area as the cluster of issues seen asrelevant by policymakers to decisions about what kind of international arrange-ments should exist on exchange rates, reserve assets, and control of internationalcapital movements, along with issues seen as relevant to adjustment, liquidity, andconfidence within a given regime or nonregime.

To what extent are the international monetary policy themes clear andconsistent throughout the period? Since the Treasury Department has the majorresponsibilities for the United States in international financial policy, we examinedUnited States Treasury Department Annual Reports for four years in each of thedecades since 1920, and including 1972. Conventional categories such as “money,”“trade,” “foreign loans,” “aid,” and “private investment,” along with items having todo with taxes, almost covered the pages of the treasury’s reports devoted to internationalquestions. Furthermore, within the international monetary area, seven key phrasesaccounted for over three-quarters of the total headings. As Table 4.1 shows, concernwith gold (particularly gold movements) was prominent throughout the halfcentury. Since these concerns and those having to do with foreign exchange areclosely related, and since both are also related to what we now call balance ofpayments issues, the table actually understates the continuity in the reports. Clearlyproblems of flows of financial assets (foreign exchange and gold) and the balanceof payments situations associated with such flows have been perceived asimportant throughout the half century. Generally, the policy issues at the core of theinternational monetary issue area have remained remarkably consistent.

Not only do policymakers perceive the international monetary issue area astightly connected; many functional linkages seem, in fact, to exist. Although sensi-tivity between monetary events taking place between any two major countries hasvaried, it was always significant between 1920 and 1976, except when exchangecontrols have been very tight, particularly during World War II. This issue area didnot include all countries in the international political system; in 1975, it did notinclude the Soviet Union, China, and other states whose governments tried toisolate themselves from the effects of international financial flows. Nevertheless,because diverse international monetary activities are connected functionally, theissue area does not exist merely in the eyes of its beholders. Perceptions of policy-makers can profoundly affect the monetary system, but they did not create it, and,short of major political upheavals, changes in those perceptions cannot destroy it.3

The International Gold Standard before 1914Discussions of international monetary regimes since 1920 invite comparisons withthe pre–World War I gold standard, which was viewed by contemporary bankers andofficials as an automatically self-equilibrating system. It is difficult to understandlater events without realizing that the minds of officials in the 1920s and even there-after were cluttered with images of the prewar system, which many saw as an ideal towhich the world should return.

TABLE 4.1 International Monetary Policy: Issues for U.S. Government, 1920–72

1920 23 25 28 30 33 35 38 40 43 45 48 50 53 55 58 60 63 65 68 70 72

Golda x x x x x x x x x x x x x

Balance of paymentsa x x x x x x x x X

Foreign exchange X x x x x X

Stabilization (of exchange): U.S.Treasury

x x x x x x x x x X

International monetary cooperation

x x x

IMF x x x x x x x x x x X

OECD (monetary issues and Working Party Three)

x x x X

a Between 1953 and 1965, “gold” and “balance of payments” appear in a single heading, “balance of payments and gold movements,” or “balance ofpayments and gold and dollar movements.”

Note: The table indicates the key phrases that appeared in headings or subheadings of at least three U.S. Treasury Annual Reports, for the first,fourth, sixth, and ninth years of each decade (counting 1920 as the first year of its decade). For the years surveyed, over three-fourths of the head-ings in Treasury Annual Reports that were considered to refer to international monetary policy contained these phrases. All of the headings with-out these phrases could easily be classified into sets, relating closely to phrases 1–3 (unilateral U.S. actions and general developments); 4 (bilateralagreements); or 5–7 (multilateral actions).

59


The classic interpretation of how the gold standard operated was presented bythe Cunliffe Committee, established by the British government toward the end ofWorld War I. This committee argued that the Bank of England reinforced the effectsof gold movements by raising the discount rate when a gold drain reduced its ratio ofreserves to liabilities, thus restricting credit and reducing prices, economic activity,and employment. It commented:

There was therefore an automatic machinery by which the volume of purchas-ing power in this country was continuously adjusted to world prices ofcommodities in general. Domestic prices were automatically regulated so as toprevent excessive imports; and the creation of banking credit was so controlledthat banking could be safely permitted a freedom from State interference whichwould not have been possible under a less rigid currency system.4

In the official view, this self-equilibrating system was an excellent device. Littleconcern was expressed that under this interpretation the burden of adjusting tochange—especially through unemployment—was borne by the working class, inparticular its most marginal members.

More recent analysis has thrown considerable doubt on this interpretation ofthe gold standard system. Arthur Bloomfield has shown that central banks weremore active than the Cunliffe report allowed, and that they used a greater variety oftechniques:

Unquestionably, convertibility was the dominant objective; and central banksinvariably acted decisively in one way or another when the standard wasthreatened. But this did not imply unawareness of, or indifference to, the effectsof central bank action upon the level of domestic business activity andconfidence, or neglect of considerations of central bank earnings and othersubsidiary aims, or sole reliance upon movements of the reserve ratio indeciding upon policy. . . . Far from responding invariably in a mechanical way,and in accord with simple or unique rule, to movements in gold and otherexternal reserves, central banks were constantly called upon to exercise,and did exercise, discretion and judgment in a wide variety of ways. Clearly, thepre-1914 gold standard system was a managed and not a quasi-automatic one,from the viewpoint of the leading individual countries.5

Although the Cunliffe Committee had emphasized domestic effects of Bank ofEngland policy, by 1931 dominant opinion about the prewar gold standard increas-ingly stressed the effects of British discount rates on international flows of capital. Asthe Macmillan Report indicated in that year:

The automatic operation of the gold standard . . . was more or less limited tothe sphere of the Bank of England and was satisfactory in its results onlybecause London was then by far the most powerful financial centre in the world. . . and could thus by the operation of her bank rate almost immediately adjusther reserve position. Other countries had therefore in the main to adjust theirconditions to her.6


London was not the only major financial center—Berlin and Paris were alsoimportant—but it was certainly the most important. Increases in British rates, orreductions in the flow of new loans to peripheral areas, greatly affected short- andlong-term capital flows, and thus balances of payments, not only of Britain but ofstates dependent on her. These effects occurred even if several central banks allraised their rates proportionately to the rise in British interest rates, because tightermonetary conditions stimulated shifts toward liquid assets, which meant increasedbalances of key currency countries at the expense of minor centers.7 Control wasthus asymmetrical, as Britain shifted the burden of adjusting to change to peripheralcountries such as Argentina, which depended heavily on British trade. The second-ary key currency centers, Berlin and Paris, acted similarly: the hierarchical systemallowed them to draw funds from lesser centers, as Britain was drawing funds fromthem. Thus the system was remarkably stable, though it was not nearly as thor-oughly dominated by Britain, and by sterling, as earlier writers had thought:

The extra control of the Bank of England over the sterling-mark exchangemight conceivably have placed excessive strain on German reserves as moneygrew tighter in London. The financial structure was such, however, as to givethe Reichsbank a similar advantage in moving the exchange rates on smallerneighboring countries in favor of Germany. This hierarchy of short-runfinancial influence, through which funds moved from lesser to greater financialcenters as interest rates rose everywhere, helped to minimize monetary frictionamong major centers by passing the short-run financial adjustment burdenalong to the peripheral countries. It provides a striking contrast to the tendencyof New York and London to compete for the same mobile funds in later yearswithout either center’s having decisive drawing power over funds fromContinental countries in payments surplus.8

The impressive degree of British control is illustrated by the small amounts ofgold that the Bank of England and the British Treasury were required to hold.Confidence in sterling was so great that in 1913 the Bank of England held onlyabout $165 million worth of gold, or less than 4 percent of the total official goldreserves of thirty-five major countries at that time. Britain’s holdings of gold wereless than 15 percent of those of the United States and less than 25 percent of thoseof either Russia or France; they were also exceeded by the official gold holdings ofGermany, Italy, Austria-Hungary, and Argentina.9 The need to hold so little nonin-terest-bearing gold was a mark of strength, not weakness:

London could economize on her gold holdings, like any good banker, because ofthe quality of her other quick international assets, her institutional structure,and because, such was the power of Bank rate and the London Market rateof discount, gold would always flow in the last resort from other monetarycentres.10

The stability of this system rested on its hierarchical structure and on financiers’confidence in the continued convertibility of sterling, and other major currencies,into gold at par value. Liquidity was increased not merely by new gold discoveries and


by diverting monetary gold stocks into official reserves, but also by increasing holdingsof foreign exchange. Whereas world official gold reserves approximately doubledbetween 1900 and 1913, official holdings of foreign exchange increased more thanfourfold; by 1913 foreign exchange accounted for 16 to 19 percent of total reserves.11

Financial hierarchy was reinforced by political hierarchy. Britain was not mili-tarily dominant over either Germany or France, but she had access to much moreextensive and prosperous areas overseas. This advantage was reflected in othercountries’ holdings of the foreign exchange of the three key states: Britain, France,and Germany. Only about 18 percent of European holdings of these three currenciesin 1913 were in sterling, whereas over 85 percent of non-European holdings of thosecurrencies were held in sterling.12

Peripheral countries generally allowed their money supplies to be influencedstrongly by actions of central banks in the center countries. Even for advanced smallstates with well-developed banking systems, the movement of short-term funds “wasundoubtedly much more responsive to changes in the discount rates of the Bank ofEngland and other large central banks than to changes in their own.”13 Argentina,which depended heavily on Britain, allowed its gold flow to determine its moneysupply; it had no effective central bank to control the process. Thus Argentina“could not nullify the negative effects of changes in British interest rates on its owneconomy.” It is not at all clear, indeed, that the peripheral states’ governmentsunderstood the processes that were going on or the disadvantageous position thatthey occupied. The absence of balance of payments statistics, and the lack of knowl-edge of the extent to which the system was managed by key central banks, ratherthan being “natural,” probably helped to maintain the system’s stability by makingthe inequality and its causes less visible. In addition, local oligarchies in the periph-eries benefited from the system.14

Although often viewed as a very long period extending into the murky past, theinternational gold standard’s life span was actually less than half a century. Someauthorities date its beginning from the 1870s, when France, Holland, theScandinavian countries, and the United States discontinued the use of silver coinsand tied their currencies to gold; others date it from 1880 or even 1900, reflecting theadherence of Austria-Hungary, Russia, and Japan to the system during the 1890s.15

Moreover, the international gold standard did not operate as smoothly as hassometimes been supposed. The central banks were not particularly sensitive to theinternational effects of their actions. They did not cooperate to manage the interna-tional gold standard in the general interest (although the central banks of Englandand France did cooperate somewhat). Yet by the end of the period, the need for suchcooperation was increasingly apparent as a result of the growth and volatility ofshort-term capital. After 1907, “there was a growing sentiment in certain quarters infavor of some kind of systematic international monetary cooperation, the absence ofwhich was a conspicuous feature of the pre-1914 arrangements, in order to minimizeundue shocks to the payments system from these and other sources.”16

Thus the prewar gold standard was by no means immutable. Foreign exchange wasbeing used increasingly in reserves; capital movements were becoming more disturb-ing; and the need for cooperation was increasingly evident. More fundamental political


changes were also taking place. As the working class gained political power it would beable to fight adjustment policies that caused unemployment and wage cuts, as theBritish strikes of 1926 later indicated. As peripheral countries became somewhat moreautonomous, their policies would become less passive. And perhaps most important,the United States was becoming more prominent in the international economy. Evenwithout the stimulus of World War I, it would eventually have begun to compete withLondon for funds, and the hierarchy would have been broken.17

The end of the international gold standard in its well-functioning phase camewith the beginning of World War I. But the trends we have just enumerated, whichwere intensified by the war, were by no means created by it. One can thereforeassume that eventually the international gold standard would have collapsed orhave been transformed, even without the war; however, the conditions under whichthat would have taken place, the form it would have taken, and its effects can neverbe known.

In practice, therefore, the prewar gold standard was short-lived, managed(although with national orientations rather than an international one), and highlysubject to change. It rested on political domination—the domination of the wealthyclasses in Britain over less prosperous groups, and of Britain, France, and Germanyover peripheral countries. Thus the reality diverged substantially from the myth ofan eternal, automatic, stable, and fair system, which could only be damaged iftampered with by politicians. Yet in later years, the myth was in many ways morepowerful, in its effects on behavior, than the reality itself. The rules of the oldregime were no longer being followed—indeed, they had never been followed asperfectly as people imagined—but they remained the standard of behavior forstatesmen and bankers, particularly in central countries such as Britain.

International Monetary Regimes, 1920–76You will recall that we distinguish regimes from one another on the basis of theirformal or de facto rules and norms governing the behavior of major actors. Whenshifts in rules and norms are very sharp, regime periods can be distinguishedwithout difficulty; but sometimes changes are gradual or sequential, and then thechoice of periods inevitably becomes somewhat arbitrary. This is particularlythe case when, as in the 1920s, a series of countries joins a par value systemsequentially, rather than as a result of general agreement, or when, as in the early1930s, countries sequentially leave such a system. In such cases we have defined theregime periods in terms of the behavior of the key currency countries—GreatBritain until 1931 and the United States thereafter. Following this convention, wehave divided the fifty-six years from 1920 to 1976 into seven periods, as shown inTable 4.2. For each period we have indicated whether an international regimeexisted, and the action at the period’s beginning that is considered to have broughtthe new regime into being or destroyed the old one.

The following pages briefly describe the rules and norms characterizing eachperiod; the degree to which they were adhered to; and the reasons for ourchoices of beginning and end-points for these regimes. The dates we selected are


not necessarily self-evident, and any such periodization does some violence tothe flow of history. This review, although not a comprehensive description ofpolitical or economic processes in this issue area over these fifty-five years,much less an explanation of regime change, will give readers unfamiliarwith the history of international monetary affairs a general description ofdevelopments, and therefore facilitate the analysis of political processes andregime change that follows.

TABLE 4.2 International Regimes in the Monetary Policy Issue Area, 1920–75

Period Years Regime situation Action at beginning of period

I 1920–25 Nonregime: floating rates, currency depreciation.

Beginning of period surveyed.

II 1925–31 International regime (de facto): Gold-exchange system focused on sterling-dollar convertibility.

Britain’s return to gold: April 1925.

III 1931–45 Nonregime: floating rates, currency depreciation, exchange controls (especiallyimportant after 1939).

Britain leaves the gold stan-dard: September 1931.

IV 1946–58 Recovery regime: internationally agreed-on system, but with ad hoc modifications allowed; exchange controls, inconvertibility of European currencies.

Bretton Woods Agreement of 1944 becomes operative.

V 1959–71 International regime: fixed but adjustable parities; dollar convertible into gold.

Convertibility of major European currencies achieved:December 1958.

VI 1971–75 Nonregime: no stable set of rules, despite fourteen-month period of fixed rates for many currencies and increased central-bank coordination toward end of the period.

United States actions making dollar inconvertible into gold: August 1971.

VII 1976– International regime: based onflexible exchange rates and SDRs, with central bank andgovernmental coordination on exchange rate policies.

Interim Committee agreement to amend IMF Articles of Agreement: January 1976.


During World War I gold exports from Great Britain virtually ceased.Although the international gold standard was never formally renounced duringthis period, it lapsed in effect. The pound and dollar were pegged together at$4.77, about 2 percent below par.18 British citizens were encouraged to sell theirforeign securities to provide foreign exchange for the war effort. By 1919, it wasclear that Britain had been seriously weakened economically by the war, andthat at least for the time being, no return to the 1914 parity of $4.86, with freemovements of international capital, was possible. Thus, in March 1919, the gold-dollar peg lapsed, and from early 1920 through 1924, “the rate fluctuatedalmost completely free from official intervention.”19 The pound reached a low inearly 1920 of $3.18, and remained below $4.00 until about the end of 1921, risingto approximately the prewar parity by the end of 1924, in expectation of return toa par value system.

Rates for continental currencies, which were also floating, showed greatervolatility and less strength than the pound. After rising from 6.25 to 9.23American cents from April 1920 to April 1922, the French franc declined rathersteadily, reaching a low point of 2.05 cents in July 1926, before being stabilized defacto at the end of that year at 3.92 cents—about one-fifth of prewar parity.20

Under the impact of German inflation, the mark fell from about two cents in 1920to virtually nothing by 1923.21 Many observers took these results as evidence ofthe dangers inherent in floating exchange rates. The League of Nations study con-ducted by Ragnar Nurkse and published in 1944 argued that although short-termcapital movements were at first equilibrating in this period, in expectation ofreturns to prewar parities, as Continental exchange rates continued to fall, dise-quilibrating speculations set in: increases in interest rates, or exchange deprecia-tion, rather than attracting funds, increased speculation against the currency, aseach depreciation provided evidence for the imminence or at least eventuality ofanother.22 Thus speculators’ psychology, in this view, became a factor in govern-mental decisions.23

The situation from 1920 to 1925 was not considered desirable by any majorgovernment involved. The Cunliffe Committee’s description of the prewar goldstandard was regarded, at the Genoa Conference of 1922, not only as an accuratedescription of previous reality but as a desirable state of affairs to which the worldshould return as quickly as feasible, although with some modifications to reduce thedeflationary effect of such a change. The major powers at Genoa agreed to establisha gold exchange standard, in which currencies would be exchanged at fixed parities,but in which most countries would be encouraged to hold part of their reserves inliquid claims on the international gold centers.24 The gold exchange standard wasdesigned to economize on gold; although it was seen as a major innovation, it infact merely legitimized and extended a practice that was becoming increasinglywidespread before 1914.25 Central banks, which should be “free from politicalpressure,” were to cooperate closely, in order to maintain currencies at par as well asto prevent “undue fluctuations in the purchasing power of gold.”26

Unlike the Bretton Woods Conference of 1944, however, the GenoaConference of 1922 does not signal a change in the international regime for


monetary affairs. It became clear, particularly to Benjamin Strong of the FederalReserve Bank of New York, that stabilization of the mark would have to precedereconstruction of the monetary order. Yet in late 1922, Germany defaultedon its reparations obligations; in early 1923 French and Belgian troops occupiedthe Ruhr; and the mark subsequently collapsed. Only after German stabiliza-tion in late 1923, supported by the Dawes loan a year later, could monetarystability return.27

The significance of the Genoa Conference is that its proposals foreshadowedthe system that central bankers attempted to put into effect after Britain’s returnto gold in April 1925, at the prewar parity of $4.86 per pound. Authorities agreethat the return to gold was a decisive event that changed the nature of theinternational monetary regime, 28although most also agree that it was a disastrousmistake. As the historian of this decision puts it, the decision to return to gold was“unfortunate and, despite all the emphasis on the long run, represented a triumphof short-term interests and conventional assumptions over long-term consi-derations and hard analysis.”29 A return to the gold standard at other than prewarparity was not seriously considered, although in retrospect it is clear that sterlingwas overvalued by about 10 percent at that rate. Yet “gold at any rate other than$4.86 was unthinkable.”30

Chancellor of the Exchequer Winston Churchill was uneasy about the decision,and asked some searching questions in a predecision memorandum, but

he was in a difficult situation, for intellectually he could see no alternative to apolicy of drift, and politically he had to rely on support in official circles, theCity, business and the country which was almost unanimous in its desire for thepolicy actually chosen. . . . Thus Churchill really had little alternative but toaccept the advice generally offered, shortsighted though it was, and to adoptthe gold standard at $4.86.31

The British return to gold in 1925 was influenced by international as well asdomestic pressures. Britain was seen as the keystone of the system, and a Britishdecision to return gold as a critical step in restoring international monetary stability.Small countries such as Sweden strongly urged return; more important, the UnitedStates pressed for speedy and decisive action. As the major international creditor,and the only major country to remain on the gold standard throughout this postwarperiod, the United States was quite influential, despite its reluctance to makeofficial commitments.32

The British decisions, added to the previous German stabilization and theFrench actions of the following year, marked the beginning of an internationalregime that lasted until 1931. The regime was established by a series of unilateralactions, rather than by international conference or by systematic alignment ofexchange rates on technical grounds. It was a genuine international regime, withknown rules, much communication among central bankers, and a good deal ofcooperation, especially between the United States and British central banks. But itwas weak politically as well as economically, reflecting Britain’s diminished postwarposition.


From 1931, when Britain left the international gold standard, until the BrettonWoods Agreement of 1944 became effective at the beginning of 1946, there was nocomprehensive and agreed-on set of rules or norms governing internationalmonetary arrangements. The United States, which would have had to assumeinternational leadership, did not do so for the first five years of the period. Americanofficials insisted that there was no connection between war debts to theUnited States and reparations payments due to its former allies; “the effort todevelop a cooperative approach to world economic recovery was thus soured by thecontinued war-debt conflict.”33 The United States went off the gold standardeffectively in April 1933, without consulting even the British and while PrimeMinister Ramsey MacDonald was at sea on his way to visit President Roosevelt.34

During the summer of 1933, Roosevelt virtually forced the adjournment, withoutsignificant agreements, of the London Economic Conference. To the consternationof his representatives there he opposed, in a public message, the plan of conferees toensure exchange rate stability as “a purely artificial and temporary expedientaffecting the monetary exchange of a few nations only.... The old fetishes of so-called international bankers are being replaced by efforts to plan national curren-cies with the objective of giving those currencies a continuing purchasing power.”35

Although France, Belgium, Holland, and Switzerland attempted to cling to oldparties in a so-called gold bloc, the domestic economic and political results weresharply adverse. Belgium devalued in 1935, followed by Holland and Switzerland;France finally followed suit in 1936 and in 1937 let the franc float for almost ayear.36 Fluctuations in currency values were severe. The situation at least until1936 was one of a pure nonregime, with virtually no international cooperation.The central bankers who had previously worked closely with one another, if notalways in perfect harmony or with much success, had been greatly discredited bythe depression, particularly in the United States. Politicians, disenchanted withorthodox opinion, were searching, almost in the dark, for panaceas or at least forstop-gap national solutions.

As a judgment on the entire period, this description must be qualified, sincethe Tripartite Monetary Agreement of 1936 (between France, Britain, and theUnited States) was at least a symbolic step in the direction of new rules, althoughit provided few concrete measures for cooperation. The treasuries of the threecountries—not the central banks, as would have been the case in the 1920s—agreed to hold the exchange for twenty-four hours. In addition, “the French gainedassurance that the United States and Britain would not indulge in competitiveexchange depreciation,”37 although there was no agreement to stabilize currencyvalues in terms of one another.

Nevertheless, the Tripartite Agreement was not much more than a faintprecursor of the international cooperation evidenced at Bretton Woods, in 1944 andthereafter. Hot-money movements played havoc with exchange rates even after theagreement, particularly in 1938, the first half of which saw a speculative outflow offunds from the United States, and the second half, the reverse. Throughout theperiod, monetary cooperation was hindered by economic nationalism as reflected bytrade barriers, German exchange controls, and a variety of bilateral clearing and


payments agreements. Governments tried to manipulate exchange rates to theiradvantage; indeed, freely fluctuating exchange rates were rather rare. In a period ofworldwide economic collapse and political disintegration, it would have beensurprising had international monetary relations been anything but chaotic.38

The onset of World War II did bring changes in arrangements governingmonetary affairs; in particular it brought “stricter rate pegging, tightened controls,and further displacement of ordinary commercial practices by intergovernmentalarrangements.”39 These arrangements did not constitute an international regimewith agreed-on rules and procedures. Formal agreement was reached at the BrettonWoods Conference in 1944, but was not fully implemented until more than a decadelater. The post-war economic plight of Europe meant, particularly after the failure ofattempted sterling convertibility in 1947, that the European Recovery Programbecame the center of attention. The IMF “sat patiently on the sidelines, guarding itsresources,” as the Marshall Plan was used to rehabilitate Europe.40 Only in late 1958,when currency convertibility was achieved in Europe, did the recovery regime giveway to full implementation of the regime agreed to at Bretton Woods in 1944.

Long and sometimes difficult negotiations begun in 1941 led to the Anglo-American Joint Statement in April 1944, which became the basis for the negotiationsat Bretton Woods and the Articles of Agreement of the International Monetary Fund.Other allied countries had been consulted during 1943 and 1944. France and Canadaproduced draft plans, and at Bretton Woods the United States and Britain had to con-tend with the Soviet Union (which eventually did not join either the IMF or theWorld Bank) as well as with several small countries. Nevertheless, although forty-fourcountries attended the Bretton Woods Conference (as compared to thirty-three atGenoa in 1922 and sixty-six in London in 1933), the Bretton Woods Agreement wasessentially an American-British creation.41

In contrast to the practices of the 1920s, at Bretton Woods the internationalmonetary issue area was not left primarily to central banks and private bankers;indeed, United States Treasury Secretary Henry Morgenthau’s objective was tocreate international financial institutions that would be instruments of governmentsrather than of private financial interests. To the annoyance of the Americanbanking community, Morgenthau saw the issue as “a question of whether theGovernment should control these things or a special country club of business andthe Federal Reserve.”42 Within the United States government, the TreasuryDepartment took the lead, although conflict with the State Department eruptedfrom time to time between the beginning of discussions, in 1942, and the abandon-ment of plans for immediate convertibility of sterling in 1947.43

The core of the regime designed at Bretton Woods was the provision that coun-tries belonging to the International Monetary Fund would set and maintain officialpar values for their currencies, which were to be changed only to correct a “funda-mental disequilibrium” in a country’s balance of payments, and only in consultationwith the fund. Thus currency convertibility was to be ensured. Great Britain hadsought greater freedom of action for individual countries, but the United States hadresisted this suggestion. The IMF was to help countries maintain par values byarranging to lend them needed currencies, up to amounts determined in a complex


scheme based on countries’ subscription quotas to the IMF. But on the insistence ofthe United States, members were not to have automatic access to the resources ofthe IMF, beyond their own subscriptions. The IMF retained discretion in judging thevalidity of members’ requests, and certain other limitations were imposed.

The IMF was given considerable nominal powers; but it was itself to be controlledby member countries with the largest quotas, since votes in the IMF were stipulated tobe roughly proportional to quotas. The United States therefore had over 33 percent ofthe voting power in the IMF in 1946; Britain held almost 16 percent. Theseproportions fell over the years, but throughout the life of the IMF, the United Stateshas been assured of a veto over most important IMF decisions.44

When these arrangements were concluded, allowance was made for a transi-tional period, during which the full obligations of the regime would not apply.Members could retain restrictions on financial transactions until three years afterthe IMF began to operate; then the IMF would report annually on them. After fiveyears the members were to consult with the fund on the retention of restrictions.45

Although the transitional period was left undefined, it was generally expected not tolast long: “Until early 1947, when the Truman administration shifted course, plan-ners thought other countries would make a relatively smooth and swift transition,lasting no longer than five years, from bilateralism to convertibility.”46

The transition actually lasted over thirteen years from the end of the war andtwelve from the beginning of fund operations. In 1947 Great Britain’s efforts to resumeconvertibility of sterling lasted barely more than a month, at a cost of about $1 billionworth of gold and dollars. Exchange controls were then reinstated, the Marshall Planwent into effect, European currencies were devalued, and the United States acceptedmeasures that discriminated against the dollar. The International Monetary Fundplayed a small role in this period.

The recovery regime that came into being during 1947 bore little resemblance tothe arrangements that had been designed at Bretton Woods. Worried about whatthey perceived as a critical Soviet threat to Western Europe, United States leaders—prompted by the State Department and followed somewhat more reluctantly by theTreasury—gave increasing aid and sympathy for Europe’s financial troubles.47 Thissupport was accompanied by an impressive array of institutional innovations: bilat-eral clearing arrangements were followed by the development of the EuropeanPayments Union (EPU) and the Organization for European Economic Cooperation(OEEC). A common sense of military threat, which manifested itself most obviouslyin the development of the North Atlantic Treaty Organization (NATO), gave theUnited States an incentive to behave generously toward Europe, and the Europeansthe willingness to follow the American lead. Within the framework of a political con-sensus, governments could allow the volume of transnational economic relations toexpand while retaining control over them.

The success of this recovery regime was shown by movements toward currencyconvertibility during the 1950s, culminating in the formal adoption of convertibilityby major European countries in December 1958.48 The beginning of 1959 thereforemarks the start of a new international regime, the full-fledged Bretton Woods regime,which lasted until the United States suspended the convertibility of the dollar into


gold on August 15, 1971. Economically, the transition was made possible by theeconomic recovery of Europe and by American financial policies that had producedlarge payments deficits, furnishing dollars to a formerly dollar-short world. In the late1950s and into the 1960s, world exports grew at the spectacular rate of 7 percent peryear; and United States direct investment in manufacturing abroad increased dramat-ically. Politically, the transition was marked not only by the hegemony of the UnitedStates, but by the development of networks of ties between central bankers as well asbetween treasuries. The Bank for International Settlements was the technical agentfor the European Payments Union, and central bankers “participated along with treas-ury officials in the managing board of the EPU, which was itself an agency of theOrganization for European Economic Cooperation in Paris. These institutionsbrought the senior European financial officials into regular working contact.”49

Yet the Bretton Woods regime had hardly been put into full operation before itfaced serious tests. The price of gold in London rose in the autumn of 1960, indicat-ing speculators’ lack of confidence that the United States government wouldcontinue to support the dollar at 1/35 of an ounce of gold. The first result was aninformal Anglo-American agreement to maintain the gold price at $35 per ounce:“The Bank of England was assured of access to New York to recompense any gold itused to meet speculative demand in London.”50 This result was followed by aninternational gold pool under which central bankers agreed to coordinate their golddealings. In 1961, the central bankers developed a series of swap agreements,providing for mutual support in the event of speculation against particular curren-cies. Had the spirit as well as the letter of the Bretton Woods agreements beenfollowed, the speculative crises that began in 1960–61 would have been met byexpansion of IMF resources; but expansion was resisted by the ContinentalEuropean countries that would have been the chief creditors. Thus, in the GeneralArrangements to Borrow of 1962, the members of the Group of Ten (the majoradvanced industrial countries) contracted to provide resources to the fund whenneeded, if they first agreed collectively to do so, in order to “forestall or cope with animpairment of the international monetary system.”51 Multiple networks of formalarrangements and informal agreements were developed within a variety of organiza-tions in addition to the IMF. Important links were maintained among centralbankers and, through the Group of Ten and Working Party Three of theOrganization for Economic Cooperation and Development, among treasuries andeconomics ministries, as well.52 To increase world liquidity, members of theInternational Monetary Fund agreed in 1967 to create Special Drawing Rights as areserve asset. By 1971, the quotas of the IMF were double those of ten years earlier.53

Thus the Bretton Woods regime went through a continual process of politicaland institutional, as well as financial adaptation. The institutional imagination andflexibility shown by the regime’s managers contrasted sharply with the rigidity ofcurrency values that member states sought to maintain. Political innovations helpedto maintain a system that had essentially been designed two decades before.

Yet the pressure on the regime continued to grow, particularly after 1967, whenGreat Britain finally devalued the pound sterling. The pegged-rate system becamemore and more difficult to maintain as the volume of short-term capital movements


*“Eurodollars are dollar-denominated deposits in banks outside the United States, including the foreignbranches of the U.S. banks. More than half of them were created outside the United States (in the world bank-ing system) in a process that is not controlled by the Federal Reserve System or by any other central bank.”A. James Meigs, Money Matters (New York: Harper and Row, 1972), p. 212.

grew dramatically. The growth of the Eurodollar* market constrained the UnitedStates as well as European countries. With a weekly flow of approximately $5 billionin each direction between the Eurodollar market and the United States, Americanfinancial institutions could “ease out from under the restraints of the FederalReserve System at least for a limited period of time.”54

The sensitivity of economic transactions between nations increased, most strik-ingly with respect to short-term capital flows:

[As] the barriers of ignorance and cost in undertaking international transac-tions have fallen, the potential speculative movement of funds has increasedenormously. . . . A crude quantitative indicator of these developments isprovided by contrasting the maximum daily speculation of under $100 millionagainst the pound sterling, in the “massive run” of August 1947, with themaximum daily speculation of over $1.5 billion into Germany in May 1969,and the movement of over $1 billion into Germany in less than an hour in May1971. Moreover, as the barriers of ignorance fall further, there is no reason why$1.5 billion should not rise to $15 billion or even $50 billion, in a day.55

The other major difficulty was that basic adjustment problems, involvingparticularly the overvaluation of the German mark and Japanese yen, were notsatisfactorily addressed within the system. German and Japanese resistance to reval-uation was coupled with the inability of the United States, as the source of the keycurrency of the system, to devalue the dollar without obtaining the consent of Japanand major European governments to change the rules. As a result, between 1959and April 1971, the dollar actually appreciated in relation to other major currenciesby 4.7 percent.56

The United States measures of August 1971 formally terminated the Americancommitment to maintain the parity of the dollar at a fixed price, on demand of foreignofficial institutions. But such an undertaking “had in fact been largely inoperative forsome time.”57 As a result of American balance of payments deficits, the value ofdollars in foreign official hands had grown so much larger than American gold stocksthat it was clear to all that massive demands for gold by dollar holders would not bemet by the United States.58 Thus to some extent the Nixon-Connally measures ofAugust 1971 merely formalized a situation that had emerged gradually over theprevious decade. Ever since the early 1960s, the United States had devised ingeniousschemes to improve the nominal position of the dollar. It had also twisted its allies’arms (particularly the Germans’) to persuade them to help protect the dollar, and hadmade it quite clear that its willingness to abide by its Bretton Woods commitmentswould depend largely on European and Japanese cooperation with its policy.

The gradual erosion of the Bretton Woods regime reminds us that interna-tional regimes do not usually start or stop neatly on a given date. A purist mightdate the “death of the Bretton Woods regime” earlier, perhaps even with the


Interest Equalization Tax imposed by the United States in 1963, which discour-aged some capital outflows. Nevertheless, we can see that August 15, 1971,marked the end of an international monetary regime as clearly as did 1914 or1931. The Bretton Woods regime had operated under conditions of de jurecurrency convertibility obligations for less than thirteen years. For most of thistime it was supported by an elaborate but essentially ad hoc network of informaland institutional arrangements; and for the last few years its status was clearlyprecarious. Yet by historical standards, its longevity is quite impressive for aninternational monetary regime.

The four years following the August 15, 1971, actions by the United States weretimes of turmoil for the world economy. The Smithsonian Agreement never restoredconvertibility between the dollar and gold, nor did it significantly interrupt the sequenceof foreign exchange crises that had foreshadowed the demise of the Bretton Woodsregime. The dollar was under pressure in February and March of 1972; sterling wasdevalued in June of that year; and the dollar was devalued by 10 percent in February1973, on top of its approximately 8 percent devaluation in December 1971. Since thisdevaluation failed to restore calm to the markets, they were closed. When they reopenedin March, the major currencies were effectively floating against one another. During thesubsequent months, values of the major currencies fluctuated widely.59

As the post-March 1973 “learning period” continued, treasury officials and bankersbegan to feel more comfortable about, and even to favor, flexible rates. The govern-mental officials—in finance ministries and central banks—no longer faced the impossi-ble task of defending artificial rates against speculation; the bankers saw their foreignexchange profits soar.60 Gradually, central banks began to intervene in the markets andto coordinate their interventions with one another. After the Organization ofPetroleum Exporting Countries sharply increased oil prices in late 1973, sending shocksthrough the world economy, it was often remarked that flexible rates had saved theinternational monetary system from a massive exchange rate crisis.

Perceptive observers had discerned the direction a reformed system would take. Ina world of uncertainty and huge magnitudes of easily movable funds, there would be noreturn to fixed rates. Fred Hirsch commented in August 1972 that “the operative issueon exchange rates is not the grand arguments between fixed and flexible, but the formthat a system of controlled flexibility should take.”61 By 1975, Marina V. N. Whitmanwas able, in an article reviewing the experience with floating rates, to state flatly that“there can be no alternative to rate flexibility in the presence of high and widelydivergent rates of inflation among nations.”62 On the other hand, the wide cyclicalfluctuations in currency values between 1971 and 1975 and the involvement of centralbanks after 1973 indicated clearly that the extreme free-market position—thatgovernments should avoid intervention entirely and let the market find its own level—was untenable. Expectations of self-denial by politicians seeking support from businessand labor and with an eye on reelection were politically unrealistic; and absoluterestraint no longer seemed economically sound. A “paucity of continuous stabilizingspeculation” meant excessive fluctuations in currency values.63

Efforts to design a new international monetary regime took place at a timeof economic uncertainty and highly publicized failures of several large banks.


Yet policy coordination among central banks, and eventually among foreignministries, increased between 1971–72 and 1973–75. In a sense, therefore, a newregime emerged informally between 1973 and 1975. The formal agreement on sucha regime, however, did not occur until 1976.

Between September 1972 and June 1974, the formal process of reform focused onthe Committee on Reform of the International Monetary System and Related Issues(known as the Committee of Twenty), established by the Board of Governors of theIMF. The United States had urged the formation of this group, within the IMF struc-ture, to dilute the power of European countries in the Group of Ten, which had drawnup the Smithsonian Agreement. Yet the committee’s original purpose rapidly becameobsolete; it had been created to restore “stable but adjustable rates,” but by 1973–74 thisgoal had clearly become unobtainable for the foreseeable future. Nevertheless, thecommittee’s activity moved reform ahead in two important ways. Although its basicobjective was still to return to stable but adjustable rates, all principal countries agreedthat floating rates would prevail in the indefinite future. Thus a detailed set of guide-lines for floating was adopted. Second, the committee agreed that Special DrawingRights (SDRs) would be valued in terms of the by-then obsolete official price of gold.Thus it took a step toward reducing the role of gold in the international monetarysystem. The committee responded to demands of less developed countries by suggestingthat advanced countries show greater willingness to provide resources for poor coun-tries seriously hurt by increases in the price of oil and related products. Finally, the com-mittee proposed that the IMF be given more influence over national financial conduct.

Beginning in September 1974, reform was centered in an Interim Committee ofthe Board of Governors on Reform of the International Monetary System, althoughpolitically the major actors were the United States and France. In December 1974,France in effect agreed that currencies would not, in a reformed system, be linked togold, and that there would be no official gold price; the United States agreed that goldcould be realistically valued (in line with market prices) and made available togovernments with balance of payments deficits. In November 1975, France agreed toaccept flexible exchange rates in the context of close cooperation by central banksand monitoring by finance ministry officials. This agreement became the basis for acommon position of the Group of Ten in December and an agreement on reform issuesby the Interim Committee in January 1976.64

The fact that complete accord was reached on formal amendment of theArticles of Agreement of the International Monetary Fund in January 1976suggests that this date can be taken as the beginning of a new internationalmonetary regime. The United States under secretary of the treasury for monetaryaffairs declared that “we have a monetary system again”; the French financeminister welcomed the agreement as “the end of a debate lasting three years”; andthe chairman of the session called it “the end of a very long road to monetaryreform that was achieved thanks to the political will to succeed.”65 United StatesTreasury Secretary William E. Simon said that he did not expect any further“major initiatives” of world monetary reform.66 Choosing a precise date forthe formation of the new regime is somewhat arbitrary, since it did come intopractice gradually, but only by early 1976 were all the pieces for an agreement in


place. This agreement was vague on many key points, and in some ways consti-tuted only a commitment to consult; nevertheless, it provided the outline of a newinternational monetary regime.

The Interim Committee took the following major actions to establish an inter-national monetary regime:67

1. Floating rates were legalized, under a series of conditions that emphasize theresponsibility of member governments “to collaborate with the Fund and othermembers to assure orderly exchange arrangements and to promote a stablesystem of exchange rates.” Countries were permitted to establish par valuesfor their currencies, but this was no longer a requirement, although it could bereinstated by the vote of members holding an 85 percent majority of the IMF’svoting power. (In practice this allows a United States veto.)

2. Various measures were taken to ensure that SDRs would be the principal reserveassets in the system, and “in order to ensure that the role of gold in the interna-tional monetary system would be gradually reduced.”

3. The International Monetary Fund was charged with exercising “firm surveil-lance over the exchange rate policies of members,” under guidelines that itwould subsequently adopt.

The committee also agreed to establish a trust fund for poor countries, to befinanced with profits from the sale of the fund’s gold and augmented withvoluntary contributions, and to liberalize credit facilities so that assistance todeveloping countries in balance of payments difficulty could be more readilyextended. The caucus for the less developed countries made easier credit terms acondition for agreement on the reform of the international monetary system.This linkage was the final issue that had to be settled before agreement could bereached.68

Implementation of these provisions would produce quite a novel internationalmonetary regime. Historically, only pegged exchange rates have been associatedwith general international agreement on monetary arrangements. The January 1976agreement, by contrast, provides for extensive international policy coordination toregulate a system based on flexible exchange rates. It is not possible for us, writingonly weeks after this agreement, to predict its success. In view of the extent of liquidassets in private hands, and the great divergence in rates of inflation among majorindustrialized countries, it would be foolish to predict a new era of harmonious mon-etary stability. Furthermore, the IMF has been weakened greatly by the disruptiveevents of the last five years, and it remains to be seen whether it can be effectiveunder a system of flexible but presumably partially managed exchange rates.69 Muchwill depend on the patterns of informal policy coordination that develop as attemptsare made further to define and implement the agreement.*

*From the perspective of the year 2000, even our cautious expectations for the post-1976 regime seemmuch too optimistic. The IMF has not exercised “firm surveillance,” and the key actor in crises (1987 and1998) has been the United States Federal Reserve. U`nilateral action by the United States was on both occa-sions more important than multilateral policy coordination or the rules of the regime.

The Oceans Issue Area 75

THE OCEANS ISSUE AREA

Nearly three-fourths of the earth’s surface is ocean. For centuries people have usedocean space for two main purposes: fishing and navigation. The oceans have beenone of the “global commons” beyond the jurisdiction of any single state, somewhatlike the common pastures in medieval villages that were open for all villagers touse.* And just as medieval villages were eventually fenced off in response toeconomic change, so states in the 1970s “fenced off” larger parts of the oceansas technological and economic change increased the uses of the oceans. Duringnegotiations at the United Nations Conference on the Law of the Sea in the 1970s,the idea of allowing states to claim 200-mile exclusive economic zones in the oceansoff their coasts received wide support. Under this plan, nearly a third of the world’soceans came under national jurisdictions. “What the 200-mile zones are mainlyabout is oil and fish. They would take in four-fifths of the world’s sea fisheries andnearly all its exploitable offshore oil.”70

Until recent decades, ocean space and resources seemed so vast that they could betreated in general as a public good, which one country could use without diminishingwhat was available to others. Of course there were specific disputes over fisheries andnavigation rights, but these could be treated as exceptions to the rule. By 1970,however, technology had increased mankind’s ability to exploit the oceans’ space andresources, thus raising questions of scarcity and stimulating countries’ efforts to widenthe area under their jurisdiction in order to exclude other countries from the resources.In fisheries, for example, the number of countries with fishing fleets increased, and newtechniques such as sonar fish-finding devices and factory ships, which process the catchat sea, increased efficiency. As a result, the annual global fish catch rose from 20 milliontons in the late 1940s to 70 million tons in the early 1970s, and several major species offish were seriously depleted. Economic and technological change in shipping was alsodramatic. The world’s merchant shipping fleet expanded from 78 million tons in 1947to 311 million tons in 1974. In 1946, the world’s largest oil tanker was 18,000 tons.Over the next twenty years there was a twentyfold growth, to 326,000 tons; and evenlarger tankers were planned. States became increasingly concerned about the ecologicaleffects of shipping accidents along their coastlines, and thus demanded restrictions onfreedom of navigation.

Not only did postwar technical and economic change increase the traditionaluses of the oceans; they also led to new uses. In particular, technology has added athird dimension—the bottom of the sea—to the issue of ocean space and resources.The costs of drilling for oil in the continental shelf that lies submerged increaserapidly with the depth of the water. The technology of offshore drilling developedrapidly in the post-war period, and the proportion of the world’s oil that comes fromunder the sea grew from virtually nothing in the prewar era to nearly 20 percentin the 1970s.** Most oil drilling occurs in waters only a few hundred feet deep.

**In 1975, offshore oil production was worth $40 billion, or as much as all commercial ocean shippingand four times the value of oceans fisheries ($10 billion). (Business Week, March 22, 1976.)

*Other global commons are Antarctica and the atmosphere.


Year

Ref

eren

ces

1945

130

120

110

100

10

20

30

40

50

60

70

80

90

1950 1955 1960 1965 1970

FIGURE 4.1 Annual references to seven oceans space and resource issuesSource: Statistics are derived from Department of State Bulletin, 1945–72.

Even more fascinating is the development of the technology for mining thepotato-sized manganese nodules that lie on the deep seabed at depths of 12,000 to18,000 feet. The existence of these deposits has been known for a long time, but onlysince the 1960s have techniques been developed that promise to make available thevast amounts of manganese, nickel, copper, and cobalt which the nodules contain.71

Defining the Issue AreaIt is not surprising, then, that attention to oceans politics dramatically increasedafter 1967, when a speech by Arvid Pardo, Malta’s ambassador to the UnitedNations, dramatized the prospects of great wealth from the deep seabed and theneed for a new regime. Indeed, oceans politics was sometimes regarded as new andunique. The 1972 president’s Report on Foreign Policy for the 1970’s includes theoceans under “new dimensions of diplomacy.” In the view of one former Americanofficial, “by 1971, in the short space of five years, the scientific, economic, social,legal, military and political questions were uncritically homogenized and beingexamined energetically in every possible international forum.”72 When the UnitedNations Conference on the Law of the Sea convened in Caracas in 1974, more than2,000 delegates from 137 states faced an agenda of over 100 items. Figure 4.1


presents this postwar increase as portrayed by the attention given to oceans issues inthe United States Department of the State Bulletin.

Although technological change has brought about new uses of the oceans andconsequent challenges to customary law, many of the postwar challenges hadantecedents earlier in this century. The interwar decades were marked by suchfamiliar “current” phenomena as conferences to save whales from extinction; effortsto deal with oil pollution at sea; at least two dozen claims of jurisdiction overcontiguous zones; United States protests over Latin American extensions; UnitedStates congressional pressures for extension of jurisdiction over fisheries and shelfresources. At The Hague in 1930, an international conference failed to agree onrevising the law of the sea. Postwar conferences held in Geneva in 1958 and 1960produced four major legal conventions on the oceans, though they narrowly failedto reach agreement on the precise limits of coastal states’ jurisdiction.

The oceans policy issue with which we are concerned is the peacetime use andregulation of oceans space and resources. A peacetime oceans regime has two majordimensions: (1) the nature and extent of states’ jurisdiction over the oceans adjoiningtheir coasts; and (2) the ownership, use, and regulation of space and resources beyondnational jurisdiction. This distinction separates the core problems of the oceans policysystem from such related but broader issues as merchant marine policy, maritime laborpolicy, and naval armaments. It does not totally exclude the use of force as a naval role.“The term ‘peacetime’ now defines only the absence of general hostilities conducted ata high level of intensity.”73 As we shall see in Chapter 5, navies have played animportant part in the political bargaining over oceans policy in peacetime.

The peacetime oceans issue area includes both “physical” relationships (for exam-ple, attempts by actors to influence each others’ policies toward oceans space andresources). Geography provides the oceans issue with fairly well demarcated bound-aries. As one congressman put it, “While it is true that oil, fish, ships, lawyers, scientists,engineers, and admirals is a strange mix, the common denominator is seawater.”74

The issue area of oceans space and resources has traditionally consisted ofweakly related issues such as fishing, commercial navigation, offshore drilling, andmilitary uses. As we have indicated, issue areas can be distinguished by the degree towhich the subissues or relationships are linked functionally (for intrinsic technicalreasons) or perceptually (through the actions and perceptions of political groups orgovernment officials). Although some oceans issues are linked functionally(conflicting uses of oceans space for navigation versus drilling; or waste disposalversus fishing), political and legal perceptions provide much of the importantlinkage. These linkages stem both from legal structures and from bargaining tactics.Legal norms about one use of oceans space frequently become precedents for similarnorms about other uses. The possibility of “creeping jurisdiction” strongly affectedAmerican views of oceans policy issues. As an assistant secretary of defense toldCongress in 1969, “the overriding concern of the Defense Department is that theeventual legal regime for the seabeds have no effect on the traditional freedom ofthe seas. All too often, we have seen legal regimes applicable to one area spillover into others.”75 Both legal and bargaining linkages have been increased byconference diplomacy. As a National Academy of Sciences report noted,


Wholly different fields of ocean activity are becoming more and more insepara-ble in negotiating situations. Even when actual physical interactions betweendisparate activities are minimal, the activities tend to be considered togetherbecause of this close legal and political relationship.76

The Classical Free Seas RegimeThe classical regime that was generally accepted for the governance of oceansspace and resources since the mid-nineteenth century can be loosely termedfreedom of the seas. The high seas were treated as nonappropriable res nullius, andcoastal state jurisdictional claims were narrowly restricted. Freedom of useoccasionally led to conflict, and some international principles of priority andgeneral standards were developed to regulate conflicting uses. Traditionally,navigation was the preferred use.77 As expressed in a 1958 Geneva convention,“the high seas being open to all nations, no State may validly purport to subjectany part of them to its sovereignty.” According to a Danish lawyer present atGeneva in 1958, this “cardinal principle . . . serves the interest of all states and wasnever contested at the Geneva Conference.”78

The principle of freedom of the seas is often associated with the writings ofHugo Grotius whose treatise on the subject in 1609 was a defense of Dutchcommercial navigational interests against Portuguese efforts at exclusion. Theprinciple was frequently abridged in practice. By the nineteenth century, however,the free seas regime was closely associated with the interests and power of the majormaritime country, Great Britain. In 1815, the British navy was larger than all theworld’s other navies combined.79 Customary law was enforced by the maritimepowers, particularly Britain. Maritime powers,

having no great interest in the extension of their own territorial waters owing tothe de facto superiority that their means of action give them over vast expansesof ocean, . . . object to establishing the exclusive jurisdiction of other states overparts of the high sea, where, in peace, their ships are subject only to the law ofthe flag, while in time of war their fleets exercise rights there that would berestricted by any extension of the zone of neutrality. Defense of the principle offreedom of the sea was thus for them a matter of national interest.80

At the turn of the century, states claiming jurisdiction beyond three miles fromthe coast (Scandinavia, Iberia, Mexico, Uruguay) accounted for little of the world’scoastline and less than 10 percent of world shipping.* In 1902, after the Americanvictory over Spain, Mexico reluctantly went from a nine- to a three-mile limit. In1905, British protests led Uruguay to release a ship seized for fishing in its contestedwaters, and in 1909 British diplomatic pressure led Portugal to accept a three-milefishing jurisdiction. In 1915, Germany enforced a three-mile limit against Sweden.81

The one issue in which the classical freedom of the seas regime did not commandfull adherence was wartime shipping. Although naval blockades of belligerents were

*There is no equivalent in oceans, for example, to the Treasury Annual Reports used in Table 4.1.


accepted under international legal doctrine, it was impossible to develop agreementabout interference with ships from neutral nations. Despite efforts to establish rulesfor the use of oceans space during wartime (conferences were held in Paris in 1856,The Hague in 1907, and in London in 1909), the great powers lacked the similarityof interest necessary to make limitations work during wars.

We should note, however, that interference with shipping during wartime hadlittle effect on adherence to the regime for other uses during wartime or during theensuing periods of peace. The major dispute between the United States and Britainover freedom of the seas, which Woodrow Wilson enshrined as a principle in hisFourteen Points during World War I, was over these wartime exceptions, not overthe legitimacy of freedom of the seas as the basis of the normal regime to govern theuse of oceans space and resources.82 In large part this situation reflected Britain’shegemonic position in oceans issues. As prime protector and enforcer of the princi-ple of freedom of the seas, Britain could grant itself de facto exceptions by interferingwith neutral shipping during wartime while continuing to uphold the principle dur-ing peace. In peacetime, Britannia ruled the waves; in wartime, she waived the rules.

Britain was careful to abide by the rules in peacetime, allowing other states tofish and navigate close to her coasts. Between 1876 and 1883, Britain adopted legis-lation which “intentionally limited herself to a three-mile limit for all purposes.”83

One American commentator even argued that,

in reality, the moderation and wisdom with which England has used her author-ity are more responsible than the strength of her fleets for the length of timethat she has been supreme and for the relatively few times in the past when hercontrol has been really threatened, or indeed, advisedly questioned.84

In a way strikingly similar to the politics of money under the gold standard thatwe discussed earlier in this chapter, the pre-1914 peacetime oceans regime washierarchical and stable, and depended on British domination externally and, to anextent, on the strong position of certain interests inside British politics—in this casethe navy and shipping interests.

Regime Periods, 1920–75Between 1920 and 1975, the principle of freedom of the seas declined from the sta-tus of a regime almost fully adhered to by all relevant states (until 1945) to a strongquasi regime in which most states adhered to the principle but strong challengesexisted (1946–66); to a weak quasi regime in which the challenges had become sogreat that the status of the rules was open to question (1967 and thereafter). Unlikethe politics of money, in which foreign exchange crises frequently provided sharpturning points in regimes, the principle of freedom of the seas has eroded gradually,making the identification of regime periods somewhat more arbitrary. Nonetheless,two turning points—the Truman Declaration and Pardo’s speech—are sufficientlyprominent to allow us to identify the three regime periods outlined in Table 4.3.

The overall regime structure based on freedom of the seas was not at issuebetween 1920 and 1945. With the destruction and dispersal of the German and


Russian navies, Britain emerged from World War I with an even greater proportionof total world fleet tonnage (47 percent in 1921) than she had on the eve of the war(32 percent in 1914). On the other hand, the United States, which had gone intothe war with only 11 percent of world fleet tonnage, was second with 24 percent in1921 (compared to second-ranked Germany’s 14 percent in 1914).85 Moreover,Britain viewed the American shipbuilding program as a challenge. Although anincipient naval arms race was curtailed in a 1922 treaty on naval arms limitations,the United States won a treaty from a reluctant Britain that allowed it to extend itspolicing jurisdiction on the high seas out to “one hour’s steaming time” from theshore to curb smugglers during Prohibition.86

Despite the antismuggling exception, which they won for themselves, theAmericans generally supported the free seas regime with narrow territorial limits.Indeed, the only major deviant state was Soviet Russia, whose effect on the regimewas small, because its oceans capabilities at that time were very limited.87 TheLeague of Nations conference called at The Hague in 1930 to codify internationallaw reaffirmed the principle of freedom of the seas. Although one can argue that thevery fact of holding a conference in which small states had a voice and vote helpedto call the three-mile limit into question, and precipitated some two dozen efforts atspecial extensions in the 1930s, the overall regime (as contrasted with the specificrule of the three-mile limit) was not called into question.88

Although the 1930 Hague Conference was unable to agree on exact limits,twenty states representing 80 percent of shipping tonnage supported a three-mileterritorial limit.89 Those states included all the major powers except the USSR(twelve miles) and Italy (six miles). Twelve states supported a six-mile limit. Effortsby Ecuador, Mexico, and Iran to extend jurisdiction in the 1930s were not recog-nized by the major maritime states. And as we have seen, even when disputes arosein such subissues as antismuggling zones and fisheries arrangements betweenthe United States and Japan in the 1930s, the disputing parties explicitly acceptedthe legitimacy of the overall regime.

Ironically, it was at the end of World War II, when the United States was theleading naval power, that the Americans inadvertently sowed the seeds of the gradualpostwar destruction of the regime. The turning point in the transition from the freeseas regime to a strong quasi regime came with the Truman Declaration of 1945. Inresponse to changing technologies of fishing and offshore oil drilling, President

TABLE 4.3 International Regimes in the Oceans Policy Issue System, 1920–75

Period Years Regime situation Action at beginning of period

I 1920–45 Free seas regime Britain reasserts leadership after World War I.

II 1946–66 Strong quasi regime 1945 Truman Declarations and Latin American extensions.

III 1967–75 Weak quasi regime Pardo’s 1967 UN speech.


Truman unilaterally established fishery conservation zones off the United States coastand asserted American jurisdiction over the adjacent underwater continental shelf“appertaining to the United States” out to a depth of 200 meters. The United Statesdeliberately used limited and ambiguous phrasing to formulate its claims, hoping toavoid damaging the overall regime. These subtleties, however, were obscured as LatinAmerican states, following the great power’s example, asserted their own claims toextended jurisdiction. Countries such as Ecuador, Peru, and Chile along the west coastof South America, where there is very little continental shelf, argued that a depthcriterion was unfair to them and claimed jurisdiction in terms of distance on thesurface. Thus extensions of shelf and fishery jurisdiction, which the United Statestried to separate from other issues, precipitated both the broader claims by LatinAmerican states and the subsequent seizures of American fishing boats and otherdifficult diplomatic incidents.90

During this second period, the overall regime was not fundamentallychallenged, but there were signs of erosion caused by challenges in particular issues.As a result, the major maritime powers, particularly the United States and GreatBritain, led efforts to reform, codify, and protect the weakened regime at two UnitedNations conferences on the law of the sea convened in Geneva in 1958 and 1960.More than twice as many states were represented at Geneva than had been at TheHague Conference in 1930. During the first period, Britain and the Netherlands hadcontrolled nearly 50,000 and 18,000 miles of the world’s coastline; but as decolo-nization progressed their dominance receded, and more and more states becameinvolved in oceans issues during the second period.91

The Geneva conferences were only partly successful in bolstering the quasiregime. Four major conventions were signed at Geneva, and no government found itpossible or expedient to attack the principle of freedom of the seas directly. But

what happened at the Geneva conference was that the freedom of the high seaswas attacked indirectly by claims to extend the limits of the territorial sea, whichwould have submitted vast areas of what has traditionally belonged to the highseas, including important sea lanes, to the sovereignty of the coastal state.92

In 1960, Canada and the United States proposed a compromise formula for limits of sixmiles territorial sea plus an additional six miles fisheries jurisdiction, including recogni-tion of countries’ right to continue to fish where they had historically fished. Thiscompromise proposal came within a single vote of the necessary two-thirds majority,and in retrospect 1960 turned out to be the high point of legal agreement in the secondperiod. In general, there were few claims to exclusive sovereignty or regulation in thehigh seas beyond twelve miles—a limit preferred by the USSR and only twelve otherstates in 1960.93 Although the North-South cleavage between rich and poor states thatwas to dominate the third period was already visible in 1960, the East-West Cold Warcleavage was the dominant political concern during the second period.

In contrast, since 1967 there has been a weak quasi regime; the freedom of theseas itself has been challenged. Ambassador Pardo’s 1967 speech helped to touch offa period of intense conference diplomacy. More important, it dramatized theprospect of enormous seabed wealth and focused attention on ocean resource and


distributional issues. Since then, the oceans have been treated less as a publichighway from whose efficient management all states can gain; instead, one state’sgain is often seen as another state’s loss.

New states, unbound by the earlier Geneva conventions, entered the game.One hundred and forty-nine states attended the New York sessions of the Law of theSea Conference in 1976, but only 51 had adhered to the 1958 Geneva Conventionon the High Seas (42 adhered to the territorial sea convention; 34 to the fisheriesconvention; and 50 to the continental shelf convention). The issues of deep seabedresources and the technical developments in offshore drilling and tanker con-struction raised new problems about the “middle and bottom” of the oceans. Lessdeveloped countries, fearing that the global commons would be exploited solely bythe technologically advanced countries under a laissez-faire regime, tended to stressbroad extension of national jurisdiction or a strong international regulatory body.The United Nations General Assembly declared the deep seabed to be the“common heritage of mankind.” China argued that the freedom of the seas wasupheld by both superpowers merely as a pretext for superpower “hegemony andexpansionism in the oceans and their plunder of the marine resources of other coun-tries.”94 Countries like Canada and Australia, which during the Cold War era wereclosely allied with the maritime powers on oceans questions, switched to a morecoastal view of their interests. And even in the United States and Britain, importantgroups like oil companies and coastal fishermen gradually gained support for wideextension of jurisdiction. Although only a quarter of all coastal states claimed juris-diction of twelve miles or beyond in 1960, more than half claimed such jurisdictionin 1970. Between 1968 and 1972 alone, the number of states claiming twelve-mileterritorial seas increased from thirty-one to fifty-two, and the number of statesclaiming two hundred-mile territorial seas increased from five to ten.95

As important, however, as the extension of jurisdiction in the third period, wasthe challenge to the very principle of freedom of the seas. The situation after 1967 wasnot merely one of “cheating on the regime,” but of pressure for an alternative regime.The principle of res nullius was challenged. The most influential broad notion thatevolved over the last decade was “the claim to ocean space” conveniently expressed inthe 1970 Montevideo Declaration, which states that “all nations have the right toclaim as much of the sea and seabed near their coasts as they deem necessary to protecttheir actual and potential offshore wealth.”96 In accord with the dominant interna-tional philosophy of developmentalism, new goals such as potential national wealthrather than tradition, defense, or general world welfare were asserted as the basis ofrights in the use of oceans space and resources.

As Ecuador’s foreign minister said in 1976 on hearing that the American Senatehad passed a bill broadening American fisheries jurisdiction to 200 miles,“For Ecuador it is highly satisfactory to see it becoming clearer in the internationalconscience that it is the sovereign right of each country to fix the limits of itsjurisdiction off its coasts with the purpose, among others, to make use of and toprotect ocean riches.”97 Although the major maritime powers did not accept thisview of the situation, by the mid-1970s, it had become increasingly clear to both theUnited States and Britain (which was involved in the third of a series of fishingdisputes with Iceland known as the cod wars) that whatever the prospects for a


*The three-mile limit was supposedly set by the distance which an eighteenth century cannon could reach.

formal treaty eventually coming out of the prolonged United Nations Conferenceon the Law of the Sea, at least one of the major dimensions of the traditional freeseas regime—narrow coastal jurisdiction—would never be the same again. Whetherby international treaty or by unilateral decisions, the result of conference diplomacyin the third period was sure to be an extension of coastal jurisdiction to 200 miles,thus fencing off a third of the world’s oceans.

The Changing Agenda of Oceans PoliticsUnlike the money issue area, in which there was considerable continuity in theissues on the policy agenda for the United States (see Table 4.1), the oceans issuearea became more complex in the postwar period. This complexity contributed tothe pressures for regime change. As we have seen, the oceans were traditionallyregarded as so vast that nations could appropriate oceans resources with only mini-mal effects on each other. Technological change challenged this traditional assump-tion, and conflicts involving different uses and use by many nations increased.These conflicts in turn led to a shrinkage of policy space or diminution of isolationamong users of the oceans. This shrinkage of policy space not only reflected realcompetitive uses (sea lanes and drilling platforms; pollution and fishing) but to alarge extent was reflected in and amplified by the politics of conference diplomacy.

Growth in the number and linkage of issues involved in oceans policy is reflectedboth in the oceans policy agenda and the way that agenda has been set for the UnitedStates over the three periods. (See Table 4.4.)* From 1920 to 1945, the United Statesrather than other countries tended to take the initiatives that put oceans policy issueson the United States foreign policy agenda. In two major issues of the prewar era(smuggling, coastal fisheries), the United States government was responding totransnational activity. In addition, the International Law Committee of the Leagueof Nations, searching for topics “ripe for codification,” set the agenda for the 1930Hague Conference in which the United States participated.

Early in the second period, United States government initiatives, responding toanticipated offshore drilling and pressures by coastal fishermen, caused problemsdemanding attention. Subsequently Latin American and other extensions of juris-diction began to set the policy agenda. More formally, the International LawCommission prepared the agenda of the 1958 Geneva Conference, and thoughthe United States helped to set the conference agenda, it was unable to keep itemsseparate or to speed up the process.

In the third period, the United States oceans policy agenda became more complexand reflected a number of sources. Much of the agenda, however, stemmed from lessdeveloped and coastal states’ efforts to control transnational activities, and from thedramatization of potential economic activity by the United Nations General Assembly.Efforts by other states to control transnational fishing; to benefit from private offshoredrilling; to control pollution, particularly in the transport of oil; and to regulate andbenefit from transnational scientific research politicized some issues. Others, like thedebate on seabed resources and seabed arms control, arose primarily from activity in


United Nations conference diplomacy. The issues that received the greatest increase inattention in the Department of State Bulletin were minerals, pollution, oil, and overallregime structure. There was more than an eightfold increase in attention to overallregime structure. (This increase occurred both in routine references and in importantstatements.)* No longer was oceans politics a simple issue of navigation and fisheriesdominated by naval interdependence. Modern maritime policymakers could only looknostalgically on days of British naval dominance as the bygone era of fish and ships.

CONCLUSION

In this chapter we have reviewed, but not attempted to explain, the changes in inter-national monetary and oceans regimes since 1920. The monetary issue area is a well-defined, clearly bounded system: a tight area, with a high degree of functional linkage.Oceans space and resources has been a looser issue area with fewer functional linkages,but it has become more closely knit over time. In the international monetary issue areabetween 1920 and 1975 we identified three international regimes (not including theone that formally came into being in January 1976), and three periods during which anestablished international regime had broken down and nothing had yet appeared totake its place. In the peacetime use of oceans space and resources, there have been threemajor regime periods, during which a strong freedom of the seas regime has declined toa situation in which the basic principle was threatened. One dimension of thatprinciple—narrow limits on coastal states’ jurisdiction—has been profoundly altered,regardless of the formal outcome of the United Nations Law of the Sea Conference.

*Important statements are White House and departmental speeches, statements, announcements, orders,and authored articles. This category excludes press releases, texts of resolutions, treaty information, and so forth.

TABLE 4.4 Status of Oceans Issues in United States Foreign Policy

Ocean policy issue 1920–45 1945–65 1966–74

Anti-smuggling jurisdiction Major

Coastal fisheries Major Major Major

Distant water fisheries Major Major

Shelf resources Major Major

Overall regime structure Major Major Major

Seabed resources Major

Pollution Minor Minor Major

Scientific research Minor Minor

Navigation restrictions Minor Minor Major

Source: Foreign Relations of the United States (Washington, D.C.: U.S. Government PrintingOffice, annually); Council on Foreign Relations and Royal Institute of International Affairs(London) newspaper clipping files.

85

Substantial changes have taken place in the politics of oceans and money over thelast half century. In this chapter we shall investigate the extent to which politicalprocesses in each issue area correspond to the ideal type of complex interdepend-ence, and whether such an approximation has changed over time. In the first half ofthis chapter we shall discuss how well oceans and monetary politics have conformedto the three conditions of complex interdependence: (1) minor role of militaryforce; (2) multiple issues, not arranged hierarchically; and (3) multiple channels ofcontact among societies. In the second half we shall ask how well our expectationsabout the politics of complex interdependence, outlined in Chapter 2, fit patterns ofbehavior in oceans and monetary politics.

THE CONDITIONS OF COMPLEX INTERDEPENDENCE

The Role of ForceIn a pure situation of complex interdependence, force would not be significant. Itwould be extraordinary if this condition were entirely realized for any major issuearea of world politics. Nevertheless it makes sense to ask whether reality comescloser to the pole of complex interdependence (no force) than to the pole of realism(force the dominant instrument). If complex interdependence reflects significantaspects of reality, the realist formulation and realist predictions will require substan-tial modification. We should also ask whether world politics in the two issue areas ischanging. Did force become less useful during the last century?

In the oceans space and resources issue area, force plays a much more direct rolethan in the monetary realm. And because force in the oceans area has traditionallybeen used overtly, through the exercise of naval power, changes in its use are easierto discern.

Complex Interdependencein Oceans and Money

5CHAPTER

86 Chapter 5 Complex Interdependence in Oceans and Money

The oceans issue area, as we have defined it, is centered on the peacetime useand regulation of oceans space and resources. It does not include those aspects ofstrategic politics between major powers that take place on or in the high seasexcept as they affect the peacetime use of oceans space. Clearly, the oceans were acrucial arena both in the nuclear balance between the United States andthe Soviet Union and for projecting conventional force to distant areas. Missile-carrying submarines, free to hide in the vast oceans space, are necessary for asecond-strike capability. According to one source, “since 1945, the U.S. navy hasexercised active suasion . . . on more than seventy occasions at all levels ofintensity and upon areas of the globe ranging from the Caribbean to North Koreathrough Trieste.”1 The visit of the battleship Missouri to Turkey in 1946, theblockade of Cuba in 1962, and the movement of the Sixth Fleet during theJordanian crisis of 1970 are three prominent examples of the successful Americanuse of naval forces to achieve security objectives in the postwar period. In the1970s, the Soviet Union had enlarged its surface navy, apparently trying toimprove its ability to intervene militarily or to show the flag for political purposesin widely scattered areas of the world.2

These important military uses of naval forces obviously intrude on the bargain-ing over a regime for oceans space and resources. The 1958 Geneva Conferenceessentially sidestepped the issue of nuclear testing at sea; and both the 1971treaty on the peaceful uses of the seabed and the Law of the Sea Conferenceavoided restricting underwater listening devices used in antisubmarine warfare.On the other hand, potential restrictions on naval navigation on the surface andon submarines through straits were important in bargaining, being treated asnonnegotiable by the United States and the Soviet Union. But although navalinterests remained powerful in determining the position of the superpowers, navydominance, at least in the United States, has declined somewhat during the 1970s.The American position announced in May 1970, with its strong free seas orientation,bore a strong navy imprint that became blurred as domestic economic interestsbecame more assertive.

The long-term trends in the use of force in these two issues have been differentfor large and small states. At the beginning of the twentieth century, force was usedinfrequently but effectively by great powers, particularly Britain and the UnitedStates, to deter smaller states that might have wished to make incursions on the freeseas regime. During the interwar period, conflict arose between the major navalpowers, when the United States used force to curtail transnational smuggling.Britain compromised on the resulting American extension of antismugglingjurisdiction. Sometimes great powers used naval force against smaller ones: Britainused force to ensure the passage of food ships through a Spanish blockade during theSpanish Civil War.3 Yet, more significant in light of future trends was the use offorce by weaker naval powers in disputes with Britain and the United States. TheSoviet Union used force against British trawlers off its coast. Canada seized fourAmerican trawlers, which, along with the American sinking of a Canadian ship,created difficult disputes in Canadian-American relations in the 1930s. Ecuadorlevied fines on an American ship in 1935; the United States did not use force to

The Conditions of Complex Interdependence 87

reply, because it saw the Ecuadorian Foreign Ministry as a transgovernmental allyagainst the Ecuadorian War Office.4

Since World War II, the large powers generally have not used force in conflictwith small states over oceans resources. And although on several occasions the greatpowers used force or threats of force to defend their military navigational rights, theseefforts have not always been successful. In 1946, a British naval force made a costlyeffort to assert that the Corfu Strait off Albania was international waters. In 1958, theUnited States sent a naval force through the straits of Lombok to protest Indonesia’sclaim that it was territorial waters.5 The United States and Soviet Union refused torecognize Indonesian and Malaysian jurisdiction over the straits of Malacca. Between1957 and 1967, Britain and the United States used naval gestures to counter Egyptianrestrictions on Israel’s navigation, particularly in the Straits of Tiran, but these effortswere not successful. As one observer wrote in 1967, “The threat of purposeful force(described by the Egyptian Foreign Minister as gunboat diplomacy) was not pursuedand, in the event, did more harm than good to British and American interests.”6

In 1968, the United States failed to respond with force to North Korea’s seizure ofthe electronic surveillance ship Pueblo; but in 1975 it responded with forceto the Cambodian seizure of the freighter Mayaguez. The special circumstances ofthe Mayaguez case illustrate the limits as well as the possibility of the use of force todefend navigational rights. Force was used by a great power that refused to recognizean extended territorial claim by a small power, but the political costs were fairly low.The United States had no diplomatic or other relations with the new Cambodian gov-ernment that would be jeopardized, and large segments of domestic opinion, resentinga recent defeat, were ready to support rather than criticize a short, sharp retaliatorymeasure. Indeed in the Mayaguez case, force may have been used less to defend therights of American merchant ships on the high seas than to indicate continued UnitedStates determination to defend its interests in the wake of the defeat in Vietnam. Ifthat was the case, then oceans space and resources were only tangential issues.

In contrast, small states have rather frequently used force to extend exclusivecoastal state fishing rights further and further from the coast, or to assert extensivejurisdiction over large areas of adjacent ocean for economic or environmentalpurposes. “Gunboat diplomacy” by great powers has largely been replaced bygunboat diplomacy of small powers. Seizures of American tuna boats by Ecuador andPeru or Icelandic harassment of British trawlers—rather than naval demonstrationsby Her Majesty’s Navy—have become symbolic of the use of force on oceans spaceand resources issues. Indeed, Britain found its mild use of force both costly andineffective in its cod war disputes with Iceland.7 In addition to the cases alreadymentioned, force was used successfully in postwar fishery disputes by Brazil againstFrance; by Argentina against the Soviet Union; and by Korea, China, and theUSSR against Japan. A 1969 naval display by the USSR off the coast of Ghana wasat least partly designed to speed release of Russian trawlers that Ghana had held forfour months.8 In general, however, the experience of Soviet willingness to use forcein securing its oceans interests was a “fairly consistent record of accepting the seizureof property and the expulsion and even loss of personnel in the interests of longerterm foreign policy objectives.”9


Although political processes are usually more complicated than statisticsindicate, in eighty instances of postwar use of naval force up to 1970 (according toone admittedly incomplete list) fourteen were over the peacetime use of oceans spaceand resources. Of these fourteen, small powers used force successfully in slightly moreinstances than did great powers.10 Such numbers can be misleading, for where deter-rence is at issue, the absence of incidents may be a tribute to the effectiveness offorce. Nevertheless, the fact that both small-power extensions of jurisdiction andincidents over such extensions increased indicates a decline in deterrence by thegreat naval powers, which had earlier preserved the peacetime oceans regime.

The changing role of force in peacetime oceans issues and the contrary trendsfor large and small states corresponds to our general discussion in Chapter 2. Onecause is military technology. Not only are nuclear powers deterred by risks of escala-tion, but by the 1970s the possession of surface-to-surface antiship missiles bysome forty coastal countries had raised the potential military costs of action bydistant-water fleets. General norms against the use of force are a second cause of thechange. A forceful response by a big state in a fishery dispute often makes it appearas an unreasonable bully, as the British discovered in the cod wars. Finally, andperhaps most important, the great powers’ attempts to use force often hinder theattainment of their extensive goals outside, as well as within, the oceans issue area.This effect inhibited the United States’ use of force in its fishing disputes withEcuador and Peru, and seems to have affected Soviet behavior as well.

Thus the role of force has changed in the oceans issue area. It is less central andno longer reinforces the dominance of powerful states. The erosion of the free seasregime enforced by great naval powers has not only given small states some leewayfor using force; it has allowed them to raise additional issues of resource exploitationthat were discouraged under the old regime. Technological change has contributedto the development of other issues, having to do with recovery of minerals from theseabed, oil drilling, and protection of the oceans environment—none of which havebeen resolved by force.

The conclusion to be drawn about trends in the use of force is complex. Theoceans remain strategically important, and this use has indirectly but stronglyaffected bargaining on issues of oceans space and resources. Military force alsocontinues to directly affect these issues, although here the dramatic change is fromthe use of force by great powers to reinforce a regime (and therefore to maintaindeterrence) to the use of force by small states to erode the established free seasregime by extending their jurisdiction. In recent years, however, many issues havearisen, partly because of technological change and partly because of the erosion ofthe established regime, on which force is not effective.

The complexity of these patterns means that any general judgment about the roleof force in oceans issues must be heavily qualified. Nevertheless, one can concludethat the actual situation in the oceans issue area lies somewhere between complexinterdependence and realism: force is useful on particular questions, occasionally, butis not the predominant factor determining outcomes. In addition, force seems to beimportant on fewer oceans issues than it was before 1945, and on many conflicts it isnot usable at all. Thus this condition of complex interdependence is approximated


more closely for the oceans issue area since 1967 than earlier, particularly than beforeWorld War II.

The use or threat of force has always been less evident in internationalmonetary issues than in oceans space and resources. In this respect, the politics ofmoney has always approximated complex interdependence better than the politicsof oceans space and resources. There is no evidence, for instance, that governmentsduring peacetime have ever threatened the direct use of force to change exchangerates, to induce other independent governments to hold particular currencies, or tosecure support for preferred monetary regimes. That is, the aggressive use of force—directly threatening to attack a country if it does not follow particular internationalmonetary politics—seems to be exceedingly rare if not nonexistent.

On the other hand, the politics of money is not completely isolated from thepolitics of military force. Monetary instruments have occasionally been used toachieve political and security goals. Jacob Viner concluded that there was substan-tial truth in the generalization, for the pre-1914 period, that “diplomacy exercised acontrolling influence over prewar international finance.”11 Germany’s economicdominance in southeastern Europe in the 1930s was used to reinforce its politicaland military power.12 The United States’ 1947 decision to cease demanding fullconvertibility of the pound and to provide increased aid for the British economy wasmotivated largely by security concerns.13 Conversely, in 1956 during the Suez inva-sion, the United States refused to support the hard-pressed British pound unlessBritain changed its Suez policy.14

Occasionally, the links have gone the other way. Military instruments haveindirectly been used to achieve international monetary objectives. While Britainretained its empire, the colonies were a source of strength for the pound, sinceLondon essentially determined their monetary policies. According to SusanStrange, in 1957 Britain directly linked military protection of newly independentMalaya to Malayan support for the pound.15 In 1966 and thereafter, the UnitedStates linked its continued military role in Europe with German support forAmerican international monetary policy.16

These cases indicate that international monetary issues are not entirelydivorced from military security politics. Yet the uses or threats of force (or the threatof withdrawing military protection) are few. Much more frequently, the policyinstruments used in bargaining over international monetary issues have come fromwithin the issue area itself or from closely associated areas such as trade policy. In the1920s, when the Bank of France put pressure on the pound, the British Treasuryhinted that it might present the entire war debt of France to Britain for collection.As Governor Moreau of the Bank of France confided to his diary: “The Bank ofFrance incontestably dominates the Bank of England, but the British Treasury dom-inates the French Treasury, so that when we put pressure on the institution ofThreadneedle Street, M. Churchill threatens M. Poincare.”17

In the 1930s, monetary and trade measures were closely linked; at theLondon Economic Conference, trade issues could not be settled until monetaryuncertainties were cleared up.18 After World War II this connection continued, asthe United States sought both a nondiscriminatory trading system and currency


convertibility at pegged rates. In 1971, President Nixon and Treasury SecretaryConnally employed both monetary and trade instruments to compel a devaluationof the dollar; but they used no explicit threat of force or of withdrawal of militaryprotection from America’s allies. Throughout the fifty-six years under review,economic instruments—within the monetary issue area or in related areas—havebeen more useful than force in international monetary affairs. Thus, regarding therole of force, the international monetary issue area conforms more closely tocomplex interdependence than to the ideal type; but no clear or dramatic changehas taken place over time.

Absence of Hierarchy among IssuesThe oceans issue area has not exhibited a consistent hierarchy of issues. Coastalinterests were powerful in the interwar period, and led to the 1945 Truman declara-tions. Although security concerns were dominant during the Cold War, the hierar-chy of goals has been challenged by new issues that different organizations or groupsregard as more important. The navy’s desire for freedom of action, for example, hasnot always had higher priority than economic interest in exploiting oceans resourcesor ecological concerns about pollution. The navy, large oil corporations, and theSierra Club often disagree; and the United States government has not been able tomaintain a consistent hierarchy among the various issues.19

The increased complexity of oceans space and resources issues is indicated bythe agendas of international conferences over the fifty years between 1920 and1970. There were six substantive agenda items at the 1930 Hague Conference. The1958 Geneva Conference, which produced four major conventions, was based on anInternational Law Commission draft with seventy-three prepared articles. AtCaracas in 1974, there were about twenty-five major items and nearly a hundredsubissues. Moreover, there were more contentious items at Caracas.

The increased number of oceans issues is also evident from the perspective ofAmerican foreign policy. As Table 4.4 showed, from 1920–45 the issue area for theUnited States consisted of two major issues (coastal fisheries and infringement ofnavigation to enforce antismuggling measures) and a half dozen minor ones. From1946 to 1966, smuggling dropped out, but continental shelf resources, distant waterfisheries, and breadth of the territorial sea brought the total of major issues to five.From 1967 to 1972, as Table 5.1 indicates, attention to oil, deep seabed resources,pollution, and overall regime questions increased dramatically.

These issues became more closely interrelated in the 1970s. There was a com-pression of policy space as more agencies became involved. In 1968, the InteragencyTask Force on the Law of the Sea consisted of three departments: defense, interior,and state. By 1975, thirteen agencies were involved.20 There are two major reasonsfor this growth and linkage of issues: technological change and internationalregime change. Figure 5.1 illustrates the role of regime change. Based on all oceansreferences in the Department of State Bulletin since World War II, it shows how simultaneous references to different issues rise during periods of internationalnegotiation over regime change.


TABLE 5.1 Average Annual References to Seven Oceans Issues

1946–66 1967–72Percentage of increase

between periods

Regime 1.7 14.5 852

Fish 10.4 26.3 252

Navigation 8.3 15.5 186

Pollution 1.5 13.8 920

Science 4.2 13.3 317

Oil .6 4.5 750

Minerals .9 10.3 1144

Total 27.6 98.2 363

Source: Statistics are calculated from Department of State Bulletin, 1946–72.

Year

Perc

enta

ge o

f lin

ked

issu

es

1945

100

10

20

30

40

50

60

70

80

90

1950

1958 GenevaConference

Pardo speech

TrumanDeclaration

1955 1960 1965 1970

FIGURE 5.1 Percentage of references to six oceans issues including linkages to other oceans issuesSource: Statistics are derived from Department of State Bulletin, 1946–72.

As indicated in Chapter 4, the international monetary system also involvestechnically complex issues. However, the issues in this issue area have generallybeen more tightly linked and have been very consistent over time. The 1972Annual Report of the United States Treasury Department, for instance, listed thefollowing five issues as needing world decision at that time:

1. Means of defending stable exchange rates and convertibility.2. Proper role of gold, reserve currencies, and Special Drawing Rights in the system.


3. The appropriate volume of liquidity.4. The permissible margins of fluctuation around exchange rates.5. Other measures dealing with liquid capital movements.21

With the exception of Special Drawing Rights, all of these issues were impor-tant in the international monetary deliberations of the 1920s and 1940s. In the1970s, however, poor countries proposed that the international monetary system beused to transfer resources, by linking drawing rights and aid, using the sale of goldfrom IMF stocks to assist less developed countries in balance of payments difficulty,and liberalizing the rules for borrowing from the IMF. Although the United Statesand other major industrialized countries regarded these issues as being of secondaryimportance in creating a new monetary regime, they took up increasing time in the1970s. Indeed, in January 1976, provisions to accommodate the demands of lessdeveloped countries were among the most controversial issues facing the InterimCommittee of the IMF.

Over the long term, some changes have taken place in the relative importanceof different types of issues. These changes are shown in Table 5.2, in which the con-cerns expressed in United States Treasury reports are in three clusters: (1) financialflows in the international monetary system, other countries’ actions, and unilateralUnited States actions (here the United States is an observer of the system, and anactor; but principal emphasis is not on its cooperation with other actors) (2) UnitedStates bilateral agreements and arrangements; and (3) multilateral agreements,institutions, and arrangements.

Several trends are noticeable from Table 5.2. Most dramatically, the proportionof attention devoted to multinational affairs has risen from zero in the reports of the1920s and 1930s to about one-quarter in the 1940s and 1950s, 35 percent in the1960s, and over half in 1970–72. Bilateral agreements, which received considerableattention in the 1930s, 1940s, and 1950s, have been relegated to a minor role. Ingeneral, emphasis on the regimes, and how to improve or construct them, has

TABLE 5.2 Attention to Three Types of Issues in U.S. Treasury Annual Reports (By Number of Pages)

Type of issuea 1920s 1930s 1940s 1950s 1960s 1970s

Flows 2.65 0.17 2.45 2.50 5.78 7.10

(100)b (46) (52) (57) (59) (46)

Bilateral 0.0 0.2 1.05 0.60 0.55 0.20

(54) (23) (14) (6) (1)

Multilateral 0.0 0.0 1.10 1.25 3.43 8.30

(24) (29) (35) (53)

a See text for definitions of these types.b Number in parentheses is the percentage of total for that decade.


increased, as opposed to the earlier focus almost exclusively on financial flows andAmerican actions with regard to them.*

On the whole, however, foreign policy agendas have been affected less by theproliferation of international monetary issues or by a loss of hierarchy among themthan by variations in their salience over time. When these questions, and othereconomic issues, have been less controversial, military security has tended todominate foreign policy and a clear hierarchy of issues appears to exist. On the whole,issues were ordered this way during the 1940s and 1950s, but that was an exceptionalperiod. In the 1920s, international monetary policy was the subject of major politicaldecision in Britain and France, and a significant source of contention between them.In the 1930s it became highly salient politically for the United States, too. In 1933,as Herbert Feis comments, it was the “storm center of our foreign relations.”22

Despite the very important deliberations at Bretton Woods in 1944, internationalmonetary affairs were eclipsed during the 1940s by World War II, and later (after ashort period in which security fears were somewhat muted) by the Cold War.

In the 1970s, political attention to monetary issues rose sharply. From the view-point of the agenda of American foreign policy, and the agendas of other majorcapitalist countries, this emphasis contributed to the apparent proliferation of“new issues.” In the monetary area, the issues are not new but have become highlysalient after a period of dormancy. At times of major decisions and crisis, such as1925, 1933, and 1971, international monetary policy has always been high politics.But when crises subside and new regimes, or new national policies, are devised, thesalience of these issues declines. Thus patterns of hierarchy among issues change asperiods of crisis come and go.**

Multiple Channels of ContactIn both the oceans and monetary issue areas, opportunities for interaction betweengovernments, at various levels, have increased dramatically since 1920. In the 1920smost relationships in these areas were bilateral. Few officials from major countriesknew each other well and met frequently. Only a few governments were involved,and their bureaucratic structures in these issue areas were quite simple. Overthe next fifty years, multilateral ties, often through international organizations,

*Discussions in the U.S. Treasury Department annual reports were also coded according to whether theyreferred entirely to direct United States concerns with balance of payments, the value of the dollar, and othernational issues, or whether they dealt with questions of the international monetary regime and schemes for itsreform. Systemic reform references were nonexistent until 1940, but between 1943 and 1955 always consti-tuted (in terms of pages) at least a quarter of the attention paid in the reports to international monetary affairs.They then disappeared from the reports until 1965, after which they rose rapidly to hold, by 1972 (the last yearreviewed), the most space in the section on international monetary relations.

**Major political figures in the governments concerned, including heads of government, have alwaysbeen involved in monetary issues at these times. An analysis of the relative attention paid to internationalmonetary issues in the New York Times since 1913, however, indicates that the attention paid to those issues inthe late 1960s and early 1970s was the highest, by far, during the period (as measured by the proportion ofspace in the New York Times Index devoted to the issue). Similar results are found for the U.S. TreasuryDepartment annual reports for the same period; and for the Department of State Bulletin since 1947. Data areavailable from the authors on request.


proliferated; the bureaucracies concerned with these issues grew much larger, and, inthe oceans case, much more numerous. Intergovernmental channels of contacttherefore increased dramatically.

The number of international organizations involved in the oceans issue areanearly quadrupled, from five during the first period to nineteen at the beginning ofthe third. The number in 1975 was close to thirty if one includes regular confer-ences, interagency coordinating bodies, and minor fisheries commissions.23 In themonetary area, the proliferation of organizations was less striking, but the growth ofcommunications networks among officials even more so. By the late 1960s and early1970s four important intergovernmental organizations operated in the monetaryarea: the Bank for International Settlements (BIS), founded in 1930; theInternational Monetary Fund (IMF), founded in 1944; the Organization forEconomic Cooperation and Development (OECD), founded in 1961 in a reorgani-zation of the old Organization for European Economic Cooperation (OEEC); andthe Monetary Committee of the EEC. As important for policy as any of these wasthe less formally constituted Group of Ten, a combination of the major OECDcountries who participated in the General Agreements to Borrow in 1962.24

Because the IMF and OECD created committees and working parties from time totime, and because memberships—both for states and individuals—on the variousbodies overlapped, the elite network structure was actually much more complex andthe opportunity for transgovernmental contacts was greater than this listing of theorganizations indicates. In view of the complexity of arrangements, and the multiplerole of participants, it is not surprising that negotiations on monetary reform aresometimes characterized as being a “financial circus.”25

Nongovernmental channels of contact have also increased in both areas. Before1945, the major nongovernmental interests on oceans issues were those of fishermen(who traditionally have been nationally oriented) and shipping firms, which wereorganized transnationally into liner conferences and other cartel-like arrangements.Since 1945, multinational oil companies and mining firms, as well as transnationalgroups devoted to science, ecology, and world order, have joined the traditionalshippers and fishers both in using the oceans and in making political demands ongovernments. There has been a rapid growth and diffusion of transnational activityin the oceans, particularly since 1945.

As transnational economic activity increased, so did transnational politicalactivity and contacts. In the 1920s and 1930s, smugglers had unintended politicaleffects, and coastal fishermen deliberately influenced policy, but neither weretransnational organizations. The Institute of International Law and the InternationalLaw Association publicly supported a three-mile limit. The International MaritimeCommittee organized discussions that helped to resolve the less controversial legalissues related to navigation and shipping.

In the second period, transnational political activity became more extensive.Oil companies worked through their lawyers’ membership in the International LawAssociation, which influenced the International Law Commission’s work on draftconventions for the 1958 conference. Scientists organized transnationally in theScientific Committee on Oceans Research (SCOR) and successfully pressed their


governments to create the International Oceanographic Commission (IOC) tocoordinate large-scale oceanographic research. World order groups worked transna-tionally to promote a stronger international regime.

Since 1967, there has been even more political activity by transnational organ-izations. Oil and mining companies have lobbied in various countries for theirpolicy preferences. The International Law Association has taken stands very closeto the positions of these two industries. Joint ventures have been started by miningcompanies in order to broaden their political support in major countries as well as tospread their economic risks.26 Scientists have done some cautious lobbying, andgroups promoting world order goals have organized various unofficial conferencesand discussions to disseminate their views.27

In the monetary issue area, on the other hand, we do not find such steady growthin the importance of transnational actors and contacts. Transnational actors werealready very important in the 1920s. American bankers were prominent actors onthe international scene, floating publicly offered foreign capital issues in the UnitedStates between 1920 and 1931 of over $11 billion.28 Politically, they were equallyimportant, because of the official disinterest of the United States government in get-ting formally involved with European reconstruction. J. P. Morgan and Companywas a major actor in the monetary history of the 1920s: as one author puts it, “Thevacuum left by the United States authorities was filled by J. P. Morgan & Co.”29

After the 1929–31 crash, the importance of bankers such as Morgan felldramatically and transnational relations remained clearly subordinate to govern-ment policies for over a quarter century. Only in the late 1950s and 1960s did thelarge-scale return of American banks to Europe, and the spectacular growth ofmultinational enterprises, return transnational actors to great prominence in theinternational monetary system. The growth of the Eurodollar market to the vicin-ity of $220 billion in 1974, and the growth in deposits of the top twenty Americanmultinational banks to $57.9 billion (30 percent of the combined head office andbranch total) in 1972, indicate the magnitude of the phenomenon. Furthermore,the change was rapid: ten years earlier, the Eurodollar market was miniscule, and in1965 only 6 percent of the deposits of those twenty banks were held abroad.30

The monetary area, like the oceans issue area, shows a clear trend toward theincreased importance of large, sophisticated organizations in transnational activity.Banks and multinational corporations have become more significant. In the 1960s, theexpansion of American banks abroad was particularly rapid. Among banks, there isgreat diversity, from huge banks such as Citibank, with hundreds of branches aroundthe world, to smaller banks that participate only peripherally in the international mon-etary system through correspondent relationships. The largest banks influence theoperation of the monetary system most strongly and have the greatest stakes in it,rather than individual speculators. Finally, from time to time, transnational networks ofprofessional economists have played a significant role in the international monetarysystem. In the 1960s and early 1970s economists seem to have legitimized the idea offlexible exchange rates to bankers and policymakers, partly through conferences held inEuropean spas, and partly as a result of the fact that major policymakers, such as UnitedStates Treasury Secretary George Schultz, were economists themselves.31


Money, Oceans, and Complex InterdependenceTable 5.3 summarizes the closeness of the international monetary and oceans issuesareas to complex interdependence, and the significant changes that took place inthis regard between the 1920s and the 1970s. In the 1970s, both issues lie closer to

TABLE 5.3 Changes in Complex Interdependence for Money and Oceans Issues,1920s–1970s

Dimensions of complex interdependence

How closely did the situation correspond to the complex interdependence model in the 1970s?

Did the patterns change over time toward the complex interdependence model?

Oceans

Negligible role of force

Weak approximation to complex interdependence; role of force still significant.

Yes, with qualifications: force in 1970s used more by weak nations but force was not effec-tive on many issues, especiallyfor the great powers.

Lack of hierarchy among issues

Close approximation to complex interdependence; hierarchy difficult to maintain.

Yes.

Multiple channels of contact

Close approximation to com-plex interdependence.

Yes.

Money

Negligible role of force

Fairly close approximation, although there are some linkages with force.

No. The role of force has always been minor and no clear trend is evident.

Lack of hierarchy among issues

Weak approximation to com-plex interdependence. Withinthe issue area, issues remainedquite closely linked and func-tionally related to one another; but when monetaryissues were salient, as in1970–75, the foreign policyagenda as a whole was charac-terized by a less clear hierarchy of issues. (Militarysecurity no longer was automatically dominant.)

No. The pattern of close linkage among issues within the monetary area persisted over time. Whenever monetary issues have become “high politics,” the overall foreign policy hierarchy has been weakened—in 1933 as well as in 1971.

Multiple channels of contact

Close approximation tocomplex interdependence.

Yes, but the pattern is not linear. Channels of contact were reduced in the early 1930s, but by the 1960s had reachedunprecedented high levels.

The Political Process in Money and Oceans 97

complex interdependence than to realism, though neither corresponds purely to theideal type. In particular, force has some effect in each area, particularly in oceanspolitics; and the diffusion of issues in the oceans area and the difficulty in orderingthem hierarchically are not paralleled for international monetary politics.Since 1920, the oceans issue area has changed more than has money on all threedimensions, but particularly on multiple issues and multiple channels of contact.

THE POLITICAL PROCESS IN MONEY AND OCEANS

“Complex interdependence” describes a set of conditions that contrast stronglywith the “state of war” on which theorists of world politics have traditionallyconcentrated. Thus, opportunities and constraints for decision-makers will bedifferent under complex interdependence than in a traditional realist world.When the use of force by others is an imminent danger, as it is under realistassumptions, survival may depend on the ability to react quickly to externalevents. Wise statesmen will therefore attempt to insulate themselves from thevagaries of domestic politics. Often they will try to follow well-tested balance ofpower or realpolitik maxims, which focus entirely on external events and ignoredomestic constraints. As in any other strategic situation in which maneuverabilityand surprise are important, the exact behavior of the actors will be somewhatunpredictable. However, each will be preoccupied with its security dilemma, aswell as with power aspirations, and thus considerations of military force will weighheavily on policy choices.

The negligible role of force under complex interdependence relaxes theseconstraints. No longer must states adjust every major foreign policy action to thebalance of military power and the nature of military alignments. On the other hand,the emergence of multiple channels of contact between countries, on multiple andnonhierarchic issues, increases the opportunities for influence. Points of conflict aswell as points of cooperation increase. The total foreign policy situation becomesmore complex. As a result, the bargaining choices for states become richer. Theycan choose which issues to emphasize, and which to ignore; on which issues todemand concessions, and on which to compromise. With fewer constraints andmore opportunities, the range of feasible policy becomes larger.

Were we to assume that states are autonomous entities, whose policies aredetermined by rational calculation of statesmen, we would have to conclude thatcomplex interdependence increases the range of choice open to policymakers. Oldconstraints have been eroded and new opportunities have emerged. Unfortunatelyfor the policymakers, however, other aspects of complex interdependence introducenew forms of constraint—less predictable than the constraints of the “state of war,”but often equally binding. The multiple channels of contact that emerge betweensocieties not only provide levers of influence for governments, but levers for influ-ence on governments by nongovernmental actors. Transnational organizations suchas multinational corporations are the most important of these actors. Multiple chan-nels of contact also imply increased transgovernmental relationships, with adverseeffects on the coherence of governmental policy. The growth of interdependence


between societies, combined with increased governmental supervision of the societyand the economy, is likely to lead first to indirect policy interdependence (in whichgovernments inadvertently affect one another adversely), then to direct policyinterdependence. New issues may arise, not from any deliberate decision by thepolicymakers, but from domestic pressures or in response to transnational interac-tions that are regarded by powerful groups as having harmful effects.

In Chapter 2 we argued that the realist and complex interdependence idealtypes implied different expectations about five aspects of the political process: (1)actors’ goals, (2) instruments of state policy, (3) agenda formation, (4) linkages ofissues, and (5) roles of international organizations. Earlier in this chapter weconcluded that both the oceans and international monetary issue areas conformmore closely to complex interdependence than to the realist image, but that neitherissue area conforms exactly to complex interdependence conditions. Now weexplore the correspondence between the expectations about political processesdiscussed in Chapter 2 and the reality that we find in money and oceans. Are theexpectations of complex interdependence more accurate than those of realism?

Goals of ActorsOn the basis of complex interdependence, we expect that the goals of states willvary by issue area; that transnational actors’ goals will differ by issue area; and thattransgovernmental politics will hinder states from pursuing coherent objectives.

On a superficial level, the first part of this tripartite proposition must almostnecessarily be true. After all, the problems that arise in oceans are not the same as inmonetary politics. The key distinction between realist and complex interdepend-ence expectations, however, rests on whether military security goals override othersin both areas. During the Cold War these goals were dominant in oceans politics;but during the 1970s economic and other goals frequently overrode military securitygoals, not only in many small or middle-sized countries but in the world’s greatestnaval power, the United States. The navy became less able to establish its objectivesas the national interest. Although it was able to maintain free passage throughstraits as a top priority, it was unable to maintain the overall priorities in oceanspolicy that it helped to establish in President Nixon’s policy statement of May 1970.For example, the firm navy position of 1969 that “the narrowest definition of thecontinental shelf would be best . . . both from a national security point of view andin keeping with the freedom of the seas attitude” was successfully challenged byother interests.32

In monetary politics, security goals have periodically been relevant, but theyhave not been determining. The United States did not abandon its war in Vietnamfor balance of payments reasons, but neither did it devalue the dollar in 1965 or1968 to finance the war. It attempted unsuccessfully to pursue both goals—victoryin Vietnam and the maintenance of a stable value for the dollar. Security considera-tions influenced negotiations about the extent of devaluation in 1971, yet the impe-tus for the Nixon-Connally actions seems to have been principally economic.Indeed some commentators were concerned that American economic bullying was


weakening the Western alliance. The New York Times, for example, complainededitorially about the treatment of our allies by the agriculture, commerce, and treas-ury departments.33

The second proposition, that transnational actors pursued different goals in thetwo issue areas, is clearly correct, although hardly surprising. Different transnationalorganizations, and different networks of elites, were involved.

The most important proposition derived from complex interdependence aboutactors’ goals is the third: that transgovernmental politics will make it difficult forstates to pursue clearly specified goals. Although it is difficult to secure systematicinformation about transgovernmental politics (since much of it is necessarilysub rosa), what evidence we have suggests that, as expected, transgovernmentalpolitics often takes place when complex interdependence conditions apply—in themonetary system when multiple channels of contact were greatest (the 1920s and1960s) and in the oceans area since the late 1950s.

Some transgovernmental relations in oceans politics take place directlybetween governmental subunits. The British and American navies regularly keepeach other informed.34 Osgood reports that Indonesia and the United Stateshave probably avoided a confrontation over straits by close navy-to-navyrelations.35 Close navy-to-navy relations also helped prevent escalation in theBrazil-United States dispute over shrimp fishing in the early 1970s.36 As we sawabove, in an earlier period, the United States geared its actions to a split withinthe Ecuadorian government over extended limits. In the antismuggling disputewith Britain in the 1920s, both the British and American governments wereinternally divided, and there may have been some transgovernmental coordina-tion among “soft-liners.”37

It is large-scale conference diplomacy, however, that has created many, perhapsmost, of the opportunities for transgovernmental relations in the oceans area. Asoceans issues became politically more salient, a wide range of groups and agenciesfrom pluralist industrial societies increased their pressure for representation ondelegations. At the Caracas law of the sea meetings, the United States delegationnumbered 110 (of which only 20 were from the State Department)—a virtualconference within a conference. The efforts of the secretary of state to cut the size ofthe delegation still left a delegation of over eighty at Geneva in 1975. The ability ofthe United States government to bargain effectively was limited by these trans-governmental contacts: “Some U.S. delegates have misrepresented views of foreigngovernments within the delegation, others have taken positions with foreigndelegates contrary to official policy. Unauthorized leaks of U.S. fallback positionshave not been uncommon.”38 Somewhat more subtly, the various “clubs” ofdelegates with similar functional interests in fishing, navies, oil, mining, and so forththat were established as part of the informal conference diplomacy set up regularchannels of communication that cut across and created tension within the alreadyfragmented national positions. Many of the smaller and poorer states had simplerpositions, which were thus less affected by these transgovernmental contacts. Inlarge-scale conference diplomacy, transgovernmental contacts helped the small andpoor to penetrate the large and strong more than vice versa.


*The Bank of England at that time was still privately owned, but it clearly performed a governmentalfunction and was part of the British policymaking network. Thus interactions between Strong and Norman areconsidered “transgovernmental.”

As expected, in the international monetary issue area transgovernmental rela-tions were most prominent in the 1920s, and then again in the 1960s and 1970s.During the 1920s, the most important transgovernmental relations took placebetween Montagu Norman, governor of the Bank of England, and Benjamin Strong,who headed the Federal Reserve Bank of New York.39* Both men believed in thegold standard and in the proposition that central banks, working together independ-ently of central governmental control, should make international monetary policy.These common beliefs provided a strong basis for their cooperation, but broughtthem into periodic conflict with their treasuries. The central bankers favored gener-ally restrictive monetary policies, but feared that domestic political pressures wouldprevent such policies. Yet such pressures could be ameliorated by cooperationamong them. In December 1924, for example, Strong cabled Norman about a possi-ble 1/2 percent rise in the New York Federal Reserve Bank discount rate, askingwhether Norman preferred to go first. Norman replied that he preferred to followNew York (he would raise his rate 1 percent to New York’s 1/2 percent) “and soappear to have our hand forced by you.”40 In 1930, when the Bank for InternationalSettlements (BIS) was being established, Norman tried to “work out some form ofwords that would place the Bank beyond the reach of Governments.”41

Both the extent to which central bankers thought in transgovernmental terms,and their increasing ineffectiveness as governments took greater control of policy inthe 1930s and as problems involving military force arose, are illustrated poignantlyin a reminiscence from Hjalmar Schacht:

The more conditions in Germany approached a climax, the greater mydesire to make use of my connections in Basle as a means of preserving peace.In the course of the summer [of 1938] therefore I asked my British colleague,Montagu Norman, whether it would not be possible to bring British policymore into line with my efforts to maintain peace. Hitherto, Britain’s policy hadappeared to be to leave Hitler a free hand in foreign affairs. When I metNorman again four weeks later, he said:

“I discussed your suggestion with Neville Chamberlain.”“And what was his reply?”“His reply was, ‘Who is Schacht? I have to deal with Hitler.’”This answer caused me considerable astonishment.42

Transgovernmental activity seems to have declined precipitously during the1930s. Crises forced governments to turn their attention to international mone-tary policy; and the depression discredited bankers, including central banks.National policies, directed and implemented by politically responsible officials,became predominant. The importance of treasury departments waxed; that of cen-tral banks waned.43

The network of ties among international monetary officials, which was revisedslightly in the late 1930s, began to be rebuilt during the war years, when plans for


postwar reconstruction were made in Washington and at Bretton Woods.44 As theBretton Woods system was gradually implemented ties among financial officialsincreased. Deputy central bank governors met frequently at the BIS; they and theircounterparts in finance ministries got together under the auspices of the Group ofTen, the OECD, and the Monetary Committee of the EEC. Strong personal friend-ships were developed both at this level and among finance ministers themselves;and considerable collegiality and esprit de corps seems to have developed.45

As monetary issues became more politicized during the late 1960s, transgovern-mental coalitions became more difficult to maintain. As Russell comments,“Central bank cooperation and transgovernmental coalitions of central bankersreceded into the political background as governments became directly and inten-sively engaged in bargaining over exchange rates.”46

A low point of transgovernmental cooperation among treasury officials wasreached during John B. Connally’s tenure as United States secretary of the treasury.Connally’s description to a congressional committee of the 1971 Smithsonian nego-tiations gives some indication of how far his approach was from the collegial norm:

In the Rome meeting when I suggested the possibility, not necessarily offered it,when I merely suggested the possibility of a ten percent devaluation, there wasa stunned silence for 40 minutes by the clock. Not a word was said, in an entireroom full of people. Not a word.

Finally one of the ministers spoke up and said that is totally unacceptable;we can’t agree to that; 5 percent would be the most we would be willing toaccept. . . . So then we went from there to where we finally wound up in theSmithsonian at 8.57 percent.47

But neither Connally nor Connallyism lasted very long. Connally’s successor,George Shultz, had much closer relations with his counterparts. Transgovernmentalpolicy coordination among finance ministers continued, and the network of ties amongcentral bankers remained. Even in the autumn of 1971, there was some truth in the jestof a British minister that “whatever differences we Finance Ministers may have, to betogether with one’s fellow sufferers and far away from one’s spending colleagues at homeis a most agreeable experience.”48 Richard Cooper has argued that the subsequentdeliberations of the Committee of Twenty on reform of the international monetarysystem were organized partly to facilitate and legitimize a transgovernmental coalitionof finance-oriented ministers against more expansionist domestic pressures.49

This discussion indicates that our expectation from complex interdependence—that transgovernmental politics would make it difficult for states to pursue clearlyspecified goals—needs qualification. Under some circumstances—when domesticinterests are sharply divided, issues are diverse, and the attention of top politicalleaders is not focused on the issues—transgovernmental coalitions can make stategoals difficult to define. We saw this effect in the international monetary area in the1920s and in oceans during the late 1960s and 1970s. Yet when domestic interestsare fairly consistent and the top political leaders highly concerned about the issues,governments still may pursue coherent policy goals, even under conditions of com-plex interdependence. The coherence of state goals is made more problematic by


complex interdependence; but it is by no means excluded. Transgovernmentalpolicy coordination seems to be inherent in complex interdependence; buttransgovernmental coalitions—in which different sectors of government workfor conflicting policy goals by aligning themselves with agencies from othergovernments—are found only under some conditions.50

Instruments of State PolicyUnder realist conditions, one expects military force, whether used directly or bylinkage, to be the most effective instrument of state policy. Under conditions ofcomplex interdependence, manipulation of economic interdependence in the issuearea and of international organizations and transnational actors is expected to bemore important for achievement of states’ goals.

As we have seen, although force remains a potential instrument of state policy inoceans issues, its use has become less frequent, particularly by large states. The fisherydispute between the United States and several South American states is illustrative.The smaller states frequently used force in the fishery dispute, but generally againsttransnational actors (fishing companies) rather than other states. The United Statesalso tried to manipulate the transnational actors. For example, the Fisherman’sProtective Act of 1954 and its subsequent amendments were designed as an alternativeto using naval force to protect the American tuna fleet. By compensating fishermen forfines paid when their boats were seized, the United States government diminished theirincentive to purchase Peruvian or Ecuadorian fishing licenses that might have impliedacceptance of the South American claims to extended jurisdiction.

The smaller states proved more adept, however, in manipulating transnationalactors. Not only did the seizure and fine procedure develop into a game in someinstances, but Ecuador and Peru were able to use American fishing companies (halfof Ecuador’s tuna industry was American-owned) and oil companies as hostages andallies. For example, “the oil companies lobbied vigorously for Washington to reducetensions over the fishing dispute for the companies’ sake.”51 When the UnitedStates attempted to apply economic sanctions, such as curtailing aid, the SouthAmericans escalated the issue—for example, expelling diplomats and using theOrganization of American States to rally diplomatic condemnation of American“economic aggression.” Because the United States was reluctant to escalate, thegreater commitment of the South Americans allowed them to manipulate economicinterdependence more successfully in the political bargaining.

More broadly, faced with the erosion of one regime, the great powers have tried tonegotiate an alternative through international organization rather than unilateralmeasures backed by force. Within the context of conference diplomacy, the UnitedStates stimulated the formation of informal groups of delegates in an effort to “educate”delegates from less developed countries to the true nature of their specific functionalinterests. As we have seen, however, these transgovernmental contacts were used moresuccessfully by small states than by the United States. More generally, as we will explorebelow, smaller and poorer states have used international organization as a means ofagenda setting and linkage in political bargaining. Although the residual possibility of


the use of force by the great powers has affected bargaining in oceans issues, the threatof force has not been the most useful instrument of states’ policies.

In monetary affairs, as we have seen, force has sometimes been linked with otherissues to affect state policy. In the 1960s, in particular, the United States linked the pro-tective role of force to monetary policy in order to affect European policies. By andlarge, however, other instruments have been more effective. In the 1960s, the UnitedStates tried to counter pressure on its balance of payments by issuing guidelinesdesigned to influence the behavior of American multinational corporations. France,meanwhile, was converting its excess dollars into gold to influence the United States bymanipulating sensitivity interdependence under the rules of the Bretton Woods regime.Later, in 1971, the United States manipulated asymmetries in underlying vulnerabilityinterdependence when it ended the convertibility of the dollar into gold. After 1971,American refusal or reluctance to support the dollar in foreign exchange markets wasoften taken as part of a strategy to force other countries to agree to international mon-etary reforms favored by the United States. International organizations have not beenas important in money as in oceans, as we will see below, but states have struggled toimprove their bargaining positions by changing membership and weighted voting for-mulas in international organizations, and by steering issues into (or out of) particularorganizational forums. In short, force has been linked with other issues to affect mone-tary politics, but, as in oceans, it has not been the most important instrument.

Agenda FormationUnder realist conditions we expect the agenda in an issue area to be determined bysecurity threats and shifts in the balance of power. But under complex interdepend-ence, it will be affected principally by changes in the distribution of resources withinissue areas as well as by a variety of processes: the evolution of international regimes,and their ability to cope with changing economic and technological circumstances;changes in the importance of transnational actors; linkages from other issues; andpoliticization as a result of domestic politics. How well is this expectation borne outfor the monetary and oceans issue areas?

For international monetary issues the agenda has largely been dominated byproblems of building or maintaining international regimes. As the New York Timeshas editorialized,

The international monetary system is a matter of great public interest onlywhen it is working badly—when the exchange rates of currencies are shootingup or down, when funds are being shifted massively by speculators or businesses,when nations are being whipsawed into booms or busts by monetary instability.By that standard, one could say that the basic aim of international monetaryreform is to make the world monetary system as uninteresting to the generalpublic as possible.52

When there have been no established regimes, attention has usually beencentered on ways to reconstruct orderly patterns of rules and norms, as in 1920–25;1936–46; and 1971–76. In 1930–31 and 1965–71, existing fixed rate regimes


became increasingly inadequate as the positions of the key currencies weakened (theBritish pound in the first case; the United States dollar in the second). As theregime’s deficiencies became more visible, monetary issues rose on state agendas,and after the collapse of the regime they remained pressing for some time. In the1960s, increases in the importance of multinational corporations and banks, byfacilitating flows of funds, contributed to these agenda changes.

In short, agenda change has come from poor operation of a regime in a coherentand functionally linked issue area. The postwar process in money contrasts with thesituation in trade, in which the agenda is set, in the United States at least, by a combi-nation of liberalizing initiatives by presidents requesting legislative authority to lowertariffs and other trade barriers, and protectionist moves by groups that have beenadversely affected by imports.53 It also contrasts with agenda-setting of oceans issues.The oceans agenda has been strongly influenced by economic and technologicalchanges that have presented new threats and opportunities to domestic groups. Coastalfishermen, affected by the technological advances of competitors, have agitated for pro-tection; tuna fishermen have lobbied for retaliatory measures; and other groups, such asoil companies, deep sea mining firms, ocean-going scientists, and ecologists have allmade their claims felt. Whereas the international agenda on oceans questions has inpart been determined by unilateral claims of other governments to increased jurisdiction,the Truman Proclamation of 1945 was a response to domestic fishing and oil interests.54

Increasingly, however the agenda has been affected by international conferences, atwhich governments of poor countries, in particular, have agitated for new arrangementsthat will more fully take into account what they perceive to be their interests.

In the oceans issue area, domestic and international political agitation aboutdistributional questions raised by technological change contributes greatly toagenda formation. In the international monetary area, increased political salienceseems to result largely from crises in the international regime. In the United Statesat any rate, fewer domestic interests are mobilized, and the control of policy hasremained chiefly with the Treasury and State departments within the government,and the financial community outside it. But for oceans issues, fragmented interests—domestic and transnational—seem to have had more influence in bringing aboutagenda changes.

In both issue areas our general expectations—that security threats will not be amajor source of agenda change—is borne out. But within complex interdependencemany patterns are possible. Agendas in different issue areas do not all change in thesame way. This variation will become even more apparent when we analyze changesin international regimes in the next chapter. At this point it should at least be clearthat patterns of agenda change among issue areas vary considerably, even whencomplex interdependence is fairly well approximated.

Linkages of IssuesUnder realist conditions, one expects linkages between issues to be made principallyby strong states, using their power in one area of world politics (particularlytheir military power) to coerce other states on other issues. Under complex


interdependence, however, one expects linkages by strong states to be more difficultto make, since force will be ineffective. Nevertheless, a variety of linkages will bemade, frequently by weak states through international organizations.

This process is strongly reflected in oceans politics during the 1960s and 1970s.In the Geneva conferences in 1958 and 1960 several linkages were made, bothbetween issues that were functionally connected and between those that were not.After 1967, linkages became even more intense, partly because of increasedfunctional interdependencies among issues. In contrast to the assumption of unlim-ited resources that underlay the old regime, a sense of actual and potential competi-tive use developed. Reinforcing this impetus towards linkage was the inclination,particularly of Third World majorities at international conferences, to link issues tosecure satisfactory overall bargains.

The major new issue since 1967, deep seabed resources, helped to precipitatethis linkage. The promise of vast treasure at the bottom of the sea increased thenumber of countries interested in the oceans issue area far beyond the major ormoderate users of the oceans. With general rather than specific interests, thesenew actors were a major source of linkage. The Seabed Committee established bythe General Assembly in 1968 expanded from the original thirty-five members toninety-one members by 1971. Learning of their technological disadvantage on theseabed issue, the less advanced countries “doggedly introduced consideration ofother maritime legal regimes related to the breadth of territorial sea rights of pas-sage through straits and fishing practices, all of which added not only new dimen-sions of complexity but also of controversy.”55 The United States and the SovietUnion both tried at first to keep the seabed issue separate from the others, butwithout success. Subsequently the United States linked economic zone conces-sions to free passage for military vessels, but generally speaking, at the conferencesheld on oceans questions since 1967, linkage has indeed become an instrument ofthe weak.

The linkage process has been quite different in monetary politics. In the firstplace, functional linkages are much more important. On many occasions between1920 and 1970, United States Treasury Department reports emphasized the obviousconnection between international monetary and trade policies.56 Internationalmonetary policy is integral to macroeconomic policy and is therefore necessarilylinked to other economic areas.

Second, linkages have been drawn in the international monetary realm by thepowerful as well as by the weak. In constructing the Bretton Woods system, theUnited States used foreign aid to affect the monetary as well as trade systems;Britain’s promise to restore convertibility of sterling in 1947 was a condition for theAmerican loan of 1946.57 After the breakdown of the “two-track” system, in whichfinancial and military issues were handled separately among the Western allies,58 itwas once again the United States that most frequently demanded the linkage ofissues. This time, trade and monetary affairs were linked by Nixon and Connally;and in discussions with Europe in the early 1970s, the United States sought generalagreement on a set of closely connected issues. This linkage was justified in func-tional terms, but the orientation was nonetheless clear: “The political, military, and


economic issues in Atlantic relations are linked by reality, not by our choice nor forthe tactical purpose of trading one off against the others.”59

In the 1970s, less developed countries did try to link agreement on a new interna-tional monetary regime to concessions by the major powers. They did not achieve thisobjective, but they did receive some concessions, in the Jamaica agreement of January1976, on the sale of IMF gold to benefit Third World members, and a liberalization ofcredit facilities. Yet their influence was clearly less strong in the IMF than in the Law ofthe Sea Conferences. Not only were their votes fewer; they had fewer bargainingresources in the monetary issue area. On oceans, they could always make trouble bydeclaring extended jurisdiction and harassing anyone who violated their newly declaredarea of control; on monetary issues, their only weapon was the costly one of default.

Our expectations about complex interdependence are confirmed for the oceansarea: linkages by weak states are important parts of the political process. But theyhave been less important in the international monetary area, where great powerscontinued to hold most of the political resources.

Roles of International OrganizationsWe have seen that international organizations involved in the oceans issue area haveproliferated over the last few decades and that transgovernmental policy coordinationand coalition-building can take place within these international organizations. It isnot rare to observe such behavior. In the International Maritime ConsultativeOrganization (IMCO), officials from transport ministries sought to broaden the orga-nization’s jurisdiction to include all pollution rather than just oil pollution, althoughthis action was against the position of the foreign offices of some of their govern-ments.60 We have also noted that, as expected under conditions of complex interde-pendence, international organizations have been significant agenda-setters.

Even more important, the politics of rule-making in the oceans issue area hasbecome closely associated with international organizations. The procedures of inter-national organizations in this area emphasize sovereignty and state equality. In thenineteenth century, it was unthinkable that a landlocked state would participate inrule-making for the oceans. But at the Hague Conference convened by the Leagueof Nations in 1930, Czechoslovakia had equal voice and vote. The codification con-ference dramatized the importance of deviant states and weakened the normativedominance of the great powers.61

Even so, the pattern of world communications in the 1930s was what Galtung callsfeudal, with vertical communication between powerful and weak states, but little hori-zontal communication among the weak.62 In the 1930s, states like Ecuador, Turkey, andIran, whose efforts to extend their jurisdiction brought forth great power protests, werediplomatically quite isolated. Later, common membership in an international organiza-tion would transform their potential diplomatic coalition into an active one.

In recent decades, international organizations have politicized oceans issues andhave greatly increased the number of states active in these questions. Even without sig-nificant oceans-related capabilities, except for coastlines, governments of less developedcountries have become influential on these issues. The major maritime powers have

Conclusion 107

been definitely on the defensive in the United Nations Law of the Sea Conference. Thefact that questions of oceans resources were raised in the United Nations GeneralAssembly in 1967 activated a set of potential coalitions in an arena where majoritarianvoting was the norm. The rules and practices of a general-purpose institution—theGeneral Assembly—thus affected deliberations on the rules and practices that wouldconstitute a new oceans regime. The fact that the rules of the international organizationfavored less developed countries gave those countries additional influence. The expecta-tions of our complex interdependence ideal type are therefore confirmed in this case.

The situation in the monetary issue area is somewhat different. Transgovernmentalnetworks were developed within international organizations such as the BIS, the IMF,and the OECD. But the interstate policy agenda was largely shaped by the condition ofthe international regime. In the 1970s, the less developed countries had some success inattaching their own preferred issues to the deliberations, but that success was limited.Most important, international organizations have not contributed to an explosivegrowth of Third World participation and influence, as they have in the oceans area.

Monetary issues have been preempted by the International Monetary Fund andby smaller, more select “clubs” of industrial capitalist countries. They have not beendecided at general United Nations forums.63 In contrast to the oceans area, the inter-national monetary area in the 1960s already had an established set of internationalorganizations, with membership by most Third World states under inegalitarian condi-tions, with votes in approximate proportion to quotas in the IMF.64 Furthermore, elitenetworks of central bankers and finance ministry officials—including bankers and offi-cials from Third World countries—were already in place. It is true that as a result ofEuropean-American disagreements in 1971, Third World states gained a greater rolein deliberations for a new international monetary regime, but this role did not makethem major actors. Financial resources remained the keys to influence. After the pricerises of 1973 made major oil-exporting countries suddenly much richer, their IMF quo-tas were soon increased, but the increase reflected their new financial eminence ratherthan the norms or procedures of an international organization.

Once again we find a contrast between political processes in the oceans andmonetary issue areas. International organizations are significant in both areas. But inthe international monetary area they serve chiefly as instruments for the coordina-tion of policy among countries with financial resources. They reflect power resourcesmore than exercising a significant influence on outcomes. In the oceans area, bycontrast, international organizations have increased the influence of small and oth-erwise weak states, at the expense of the major maritime powers.

CONCLUSION

Table 5.4 summarizes the extent to which our expectations about the politicalprocesses of complex interdependence, as discussed in Chapter 2, were borne out foroceans and money in the early 1970s. In both cases the political processes werecloser to those expected under complex interdependence than to those expectedunder realist conditions; but the correspondence of results in our expectations was


TABLE 5.4 Political Processes of Complex Interdependence: Oceans and Money,1970–75

Expectations under complexinterdependence conditions

Borne out in oceans area?

Borne out in monetary area?

Goals ofactors

Goals of states will vary by issue area; transgovernmental politics will make goals difficult to define; transna-tional actors will pursue their own goals.

Yes. To some extent; but under some conditionspolicy coherence is greater than the complexinterdependence ideal type would suggest.

Instruments ofstate policy

Manipulation of economic interdependence;international organizations and transnational actors will be the major instruments.

Yes, though force is some times used.

Yes, though there was linkage to the protectiverole of force in the 1960s.

Agenda formation

The agenda will be affected by changes in the distribution of resourceswithin issue areas, the status of international regimes, changes in the importance of transnational actors, linkages from other issues,politicization as a result ofdomestic politics, and the politics of international organizations.

Yes: inter-national organizations and domestic politics especiallyimportant.

Yes: status of the interna-tional regime especiallyimportant.

Linkages of issues

Linkages by strong states will be difficult to make; but a variety of linkages will take place. They will often be made by weak states through international organizations, eroding ratherthan reinforcing hierarchy.

Yes: both parts of predictionare borne out.

No: linkages are made, but as much by the strong as by the weak.

Roles of inter-nationalorganizations

Significant as agenda-setters,arenas for coalition formation, and as arenas forpolitical action by weak states. The ability to choose organizational forum for an issue and to mobilize votes will be an important politicalresource.

Yes, in all three ways.

Of lesser significance;important as arenas forcoalitions and as coordi-nating devices, less so asagenda-setters or as arenas for political actionby weak states.

Conclusion 109

much greater in the oceans than in the international monetary issue area. In partic-ular, less developed countries had more influence in the oceans area, and they usedinternational organizations more effectively.

Over a longer period, the oceans case supports the proposition that as condi-tions in an issue area become closer to those of complex interdependence, politicalprocesses will change accordingly. The exercise of force by great powers declined,increasing small states’ maneuverability. Multiple issues and multiple channels ofcontact among societies rose. There were increases in politicization, bargaininglinkages among issues, opportunities for small states, and involvement of interna-tional organizations in oceans issues. Direct policy interdependence increased, as aresult both of increased societal interdependence and of increasing awareness ofindirect interdependence, particularly when unilateral claims of jurisdiction or con-trol were made. The political process became increasingly complex, with more gov-ernment agencies involved, and more opportunities for transgovernmental as well asintergovernmental relations.

In the international monetary area, on the other hand, we found considerablecontinuity in the issues and in the governmental agencies that dealt with them.Transnational actors became very important during the last fifteen years of theperiod; but up to that time, their greatest importance had been at the beginning ofthe period, in the 1920s. The most important change in the monetary issue systemwas not in the conditions of complex interdependence (which were present inlarge degree throughout much of the period) but in governmental activities.Governments became much more active on international monetary questions—particularly the United States government, which had been extraordinarily passivein the 1920s. Politically responsive agencies such as the Treasury Department gainedinfluence at the expense of the Federal Reserve Board and New York FederalReserve Bank, which were not directly under presidential control. Issues becamepoliticized domestically in the late 1960s and early 1970s to an unprecedenteddegree, and international organizations became more important, at least as forums,than in the prewar period. At times of decision, splits within the United States gov-ernment were repeatedly evident. Bargaining linkages appeared at times of sharpconflict, and tended to increase, not so much because the number of issuesincreased, but because governments, particularly that of the United States, usedmanipulation of linked interdependencies as an important policy instrument.

We have not yet explained the changes in international regimes in the oceansand monetary issue areas. That comes next. At this point it is sufficient simply tonote once again the differences between the two areas, both in the 1970s and in theirevolution over the half century before that. Under conditions approaching those ofcomplex interdependence, international politics is different than in the realistworld; but it is not by any means uniform.

110

In Chapter 3 we asked how and why regimes change and presented four explanatorymodels. We suggested that analysis should begin with the simplest, or most parsim-onious, explanation of regime change and that one should add complexity as necessary.As we saw in Chapter 3, the simplest explanation of regime change would emphasizeeconomic growth processes. That is where we shall start.

ECONOMIC PROCESSES AND REGIME CHANGE

The economic process model of regime change is based on welfare-oriented responsesto economic and technological change. In it, international and transnational economicrelations will tend to outgrow international regimes: the superstructure of world politicswill no longer be able to cope with changes in the basic relations of production andexchange. In one way or another, the regime will have to be adapted or be broken. Thismodel implies that governments will be reluctant to deny themselves the welfare bene-fits of economic interdependence, and that they will therefore be under pressure toadapt the regime or quickly to construct a new one. It ignores questions about theinternational distribution of power. Thus this model explains both the decline ofinternational regimes (due to technological change and the growth of interdependence)and the reconstruction or adaptation of such regimes (in response to the perceivedthreat that welfare benefits will be lost otherwise).

Table 6.1 indicates the five occasions on which regimes were established or recon-stituted and the four points at which regimes have broken down or weakened sharply inthe monetary and oceans areas since 1920. The economic process model predicts thatregime breakdown will be accounted for by technological and economic change, andthat regimes will be established or reestablished to ensure the welfare benefits of inter-dependence. As Table 6.1 shows, the economic process model explains some aspects ofevery regime change. Technological changes have been rapid in both issue areas, and

The Politics of Rule-Making in Oceansand Money

6CHAPTER

Economic Processes and Regime Change 111

TABLE 6.1 Regime Change: Economic Process Model

DateIssuearea Description of change

Accounted for by economic process model?

Regime Establishment or Reconstitution

Pre-1920 Oceans Britain established free seas regime

Partially. Economic model explains thebenefits of a free seas regime for Britain.

1925 Money Britain returned togold standard

Partially. The return to peacetimeeconomies made it possible. But misconceptions and the decision-makingprocess are crucial to explanation.

1944–48 Money Bretton Woods regime established but held in abeyance by agreement

Partially. Interdependence was at a lowebb. Perceptions of future benefits frominterdependence did have an effect.

1958 Money Bretton Woods regime fully implemented

Partially. Economic recovery made theimplementation of Bretton Woods possible. But the politico-military roleof the U.S. was also very important.

1976 Money Kingston Agreement Partially. Benefits of trade and capital flows created an incentive foragreement, but close political relationsamong major countries also played animportant role.

Regime Weakening or Breakdown

1931 Money Britain departed from gold standard

Partially. Economic changes were crucialgiven a fragile political structure andprevious political decisions.

1945 Oceans Extensions following Truman Proclamation

Partially. Technological change led tothe incentive to appropriate additionaljurisdiction over the seabed. Timing isnot explained.

1967 Oceans Pardo speech; UNbecame involved

Partially. Perceptions of benefits due totechnological change were important.Timing again is not explained.

1971 Money Bretton Woods regime collapsed

Partially. Technological and economicchanges led to increased flows of fundswith increased speed, and basic economic shifts to Europe and Japanwere important. Timing, and the factthat the U.S. took the initiative, arenot explained.

112 Chapter 6 The Politics of Rule-Making in Oceans and Money

changes in economic processes have been important. The benefits of cooperating tomanage interdependence have also been obvious, even though it has not always beenpossible to agree on how cooperation should take place.

But as we said in Chapter 2, the economic process model does not provide asufficient explanation of any change. In every change international political factorswere at least as important as economic processes. Perhaps this model is best forexplaining Britain’s 1925 return to the gold standard after peacetime conditionshad been established, and its departure from gold in 1931 under the stress of thebanking collapse and world-wide depression. But even then, political factors wereimportant. Britain’s leaders had a conception of their role in 1925, derived fromBritain’s traditional hegemonic position as well as from their economic beliefs, thatcontributed to their decision. Similarly, we cannot explain the events of 1931adequately without considering the lack of a coherent political framework amongthe major Western countries and the actions of France, in particular, againststerling in the preceding years.1

The economic process model also predicts some turning points that did notoccur. After the disaster of 1931, this model would have led one to anticipatesuccess at the 1933 London Economic Conference, because the costs of competitiveexchange rate manipulation and trade barriers were evident to all. Yet the conferencecollapsed—as proponents of an overall structure model, pointing out the absence ofhegemony or effective leadership, would have predicted. It is true that greatercooperation among the United States, Britain, and France was evident by 1936 inthe Tripartite Agreement, but its provisions were quite limited. Only after WorldWar II created the political and, to some extent, the economic conditions forcohesion among the major capitalist countries, was substantial progress toward anew international monetary regime made.

The economic process model provides necessary but not sufficient conditions forregime change in the monetary and oceans issue areas. Any complete explanation willhave to include the distribution of power. The simplest explanation in terms of power isthe overall structure model—traditional high politics—to which we turn next.

OVERALL STRUCTURE AND REGIME CHANGE

The overall structure model rests on the premise that the strong make the rules.International regimes must be consistent with the interests of the most powerfulstates in the system. As aggregate power relations change, international regimeschange in corresponding ways. Because military power is dominant whenconstraints on its costs are removed, wars tend to create regime change. However,in Chapter 3 we also developed a model of eroding hegemony to explain thecollapse of international regimes in the absence of war. When overall power in aninternational system becomes dispersed, international regimes break down. Whenpower becomes more concentrated, new regimes, favorable to the powerful states,will be developed.

Overall Structure and Regime Change 113

The simplest version of an overall structure approach uses the distribution ofmilitary power to explain the nature of international regimes. Our investigationsfound, however, that with some exceptions, the distribution of military powerdoes not provide very good explanations. For example, Britain’s dominance of theoceans before World War I was more pronounced than her general politicomilitaryposition in relation to other great powers. Between the wars, British leadership inmaintaining a free seas regime was not accounted for by its general military position,which had been seriously weakened by World War I. After World War II, Americandominance of the seas was much stronger than its margin of military and politicalsuperiority over the Soviet Union. In no case was the military power structureblatantly inconsistent with the oceans regime; but in each case there were considerablediscrepancies between rule-making authority and overall levels of military power.

A similar incomplete relationship between the structure of the military system andthe ability to determine the rules is evident in the monetary issue area. Before the mid-1930s, the United States had less influence than one would have predicted from itsmilitary capabilities, and Great Britain had more. After World War II, the outstandinganomaly is the Soviet Union. In the international monetary system, Soviet influencewas virtually nil, because its economic system did not permit it to participate actively ininternational economic affairs under the rules of the IMF or the GATT. Influence overinternational monetary affairs has been concentrated among major capitalist countries.

As we argued in Chapter 3, the shifts in the distribution of military power onlypartly explain the erosion of the Bretton Woods regime during the 1960s and itseventual demise. Changes in perceptions of military threats, in the relativeeconomic strength of the United States and its partners, and in hierarchical patternsinvolving Europe and the Third World all had an effect. When these variables areadded, the explanatory power of the overall structure model is much improved. Themore sophisticated overall structure model is particularly good at explaining theearly erosion of the free seas regime and the postwar establishment and implementationof the Bretton Woods monetary regime.

Erosion of the Oceans RegimeIn the aftermath of World War I, a weakened Britain had to make concessions to theUnited States over pursuit of smugglers on the high seas. By 1945, the overall powerof the United States meant that the extensions outlined in the TrumanProclamation went uncontested. The Truman Proclamation was worded in a waythat the United States hoped would avoid any further erosion of the regime, butmany of the subsequent claims went much further than the Truman Proclamation.Despite the United States’ naval preponderance and the fact that many of theoffending states were in Latin America, an area of alleged American hegemony, theUnited States was unable to prevent further erosion of the regime.

The overall power structure explains much of this situation. Between 1945 andthe 1960s, American dominance on the seas was significantly tempered by the factsthat the United States was engaged in a global struggle with the Soviet Union and


that its overall military strength was not as obviously superior as its naval power.Two factors are important: Soviet policy, which was influenced by its global-militaryposition, and American attempts at alliance leadership.

Until the 1960s the Soviet Union held revisionist attitudes toward some importantaspects of the oceans regime. As a continental power with a weak navy since itsdefeat by Japan at the beginning of the century, Russia had continually pressed forextended jurisdiction to protect its coasts. Indeed, from 1917 until the early 1960s,it regarded the law of the sea as “a set of rules to push others away from Sovietcoasts.”2 In the postwar period, it not only claimed and defended a twelve-mileterritorial sea, but also “closed” important adjacent seas.3 Although it had a weaknavy, its position as a nuclear power allowed it to deter any significant challenge toits coastal claims. In the International Law Commission and at the 1958 UnitedNations Conference on the Law of the Sea, the Soviet Union encouraged otherstates to join it in opposing the three-mile limit. It was not until the 1960s that theSoviet and American positions began to converge.

Second, the bipolar power structure in the military system made the UnitedStates the leader of a global anticommunist alliance. During the period of tightbipolarity when the perceived security threat from the Soviet Union was particularlystrong, the United States placed security concerns and alliance maintenance at thetop of its priorities. For example, in 1954, shortly after Peru successfully used forceagainst the Onassis whaling fleet (which the United States protested diplomatically),it was American policy to avoid a confrontation that would disrupt alliancerelationships. Instead it tried to “put an end to what it considers exaggerated claimsof territorial rights” through “piece by piece discussion of high seas problems” in theUN General Assembly. Yet in describing the agenda, a State Department officialadmitted that the oceans question was not vital compared with the disarmamentand atoms-for-peace issues.4 In 1956, when the United States found itself isolatedon a vote by the Inter-American Council of Jurists to recognize each state’s right toset its own limits, it resorted to bilateral diplomacy in Latin American capitals. Itemphasized the threat that extended limits would pose to Western defense, but theresult was merely an ambiguous formula at the next OAS conference.5 On a personalvisit to Peru, Secretary of State Dulles won agreement in principle on a fisheriespact, but his attention was subsequently diverted by the impending Suez crisis.6

In the meantime, the United States had passed the Fisherman’s ProtectiveAct, under which the United States Treasury reimbursed fines paid by tunafishermen for fishing without licenses while maintaining the legal position ofnonrecognition of extended jurisdiction. The United States had decided that itwas cheaper to maintain its legal position by manipulating the domestic end of aconflictual transnational system than by curtailing the system or by interveningabroad. Whatever the legal effect, the international political effect was toweaken the credibility of American efforts to deter extended claims to oceansspace. When the alliance leader confronted its weak allies in the oceans issuearea, it was the superpower that blinked. As The Oil Forum explained to itsclientele, in prewar days military reprisals would have been taken, but thegovernment was afraid that a local confrontation might become “an awful atomic

Overall Structure and Regime Change 115

war”; and “we needed friendly relations with South America.”7 As a nuclearsuperpower concerned with alliance leadership in a bipolar military system, theUnited States had less leeway in exercising its potential naval hegemony thanhad Britain. In the multipolar military system of the nineteenth century, she hadnot had to worry about objections from allies or nuclear threats.

International Monetary RegimesThe sophisticated version of an overall structure model has a mixed record ofpredicting regime change in the international monetary area. It does not explainthe fact that in the 1920s Britain regained its position as the center of interna-tional financial relations, and that the Bank of England became the acknowledgedleader in the international monetary system. Indeed, because the United Stateshad the most overall military and economic power after World War I, the overallstructure explanation would have predicted an American-centered postwarregime.* Changes in the overall power structure did not precipitate the collapse ofthe monetary regime in 1931, although Britain’s weakness made the regime morevulnerable to pressures created by the world depression. The overall structuremodel would not have allowed us to predict the international monetary regime of1925–31, but once it had emerged, this model would have correctly anticipatedthe regime’s short life.**

The overall structure model is most successful in the international monetaryarea for the immediate postwar period. American military and economic dominanceplayed an important part in the development of the Bretton Woods recovery regime(1944–48) and in the full implementation of Bretton Woods in the years after 1958.It was also significant though less overwhelming in events leading to the 1971regime change and in negotiations between 1971 and 1976.

The development of bipolarity and the perception of a Soviet threat explainAmerican willingness to hold certain rules in abeyance for the sake of Europeanrecovery. The change around 1947 toward a more generous, even paternalistic,American policy toward Europe and later toward Japan was affected by the changingperceptions toward the Soviet Union. Fear of the Soviet Union, even as early as thespring of 1946, was crucial in increasing support in Congress for the loan to Britain.

*American bankers sought in 1918–20 to ensure that New York would replace London as the majorinternational financial center, but disagreed on whether this should be done by competing directly withBritish banks or by gradually “Americanizing” and dominating the facilities of the British financial system.Disagreements among bankers, and lack of strong support from the government, helped to preventAmerican dominance from being attained during the 1920s. See Joan Hoff Wilson, American Business andForeign Policy, 1920–1933 (Lexington: University of Kentucky Press, 1971), pp. 14–17. See also Carl P. Parrini, Heir to Empire: United States Economic Diplomacy, 1916–1923 (Pittsburgh: University ofPittsburgh Press, 1969).

**No structure model can be expected to predict actions based on misperceptions of reality as the 1925British return to gold was. Britain’s leaders overestimated their own resources and underestimated the stressesthat the international economy would experience during the next decade. The fact that ultimately the Britisheffort to lead without sufficient political resources failed, as an overall structure theory would predict, can beseen as evidence for the importance of this theory in explaining long-run change.


The next April, the State Department was busily organizing generous measures forBritain, whereas the Treasury Department, less responsive to political and militarytrends, was being tight and bankerlike, as before.8 Massive American aid, which hadnot been in prospect before the Soviet threat was perceived, despite the economicarguments that could sensibly be made for it, poured out to Europe, and to someextent Japan. After the fiasco of Britain’s attempted resumption of convertibility in1947, the United States not only tolerated European discrimination against thedollar but also provided the European Payments Union with $350 million inworking capital to establish a scheme, based on such discrimination, that wouldincrease intra-European trade.9 Throughout most of the 1950s the United Stateslooked benignly on its persistent balance of payments deficits. In 1950 the Treasurywelcomed a net gold outflow as indicating an improvement in other countries’positions. In 1955 the American liquidity deficit was cited as helping other countriesrelax their exchange restrictions.10

Thus in the late 1940s and early 1950s, fear of the Soviet Union and militarybipolarity helped to increase the willingness of the United States Congress andthe Treasury Department to make concessions to European countries (and laterto Japan) on international economic issues. This in turn provided Americandiplomats with instruments that could be used to work gradually toward imple-mentation of the open, multilateral trade and payments issues of the BrettonWoods regime. Developments in the military system thus reinforced Americanpolitical leadership as well as assisting America’s partners economically. Theytherefore helped to ensure that the United States would use its capabilitiesactively in the monetary system, rather than adopting the more passive ornationalistic policies of the interwar years.

The rise in the economic capabilities of Europe and Japan clearly contributed tothe collapse of the Bretton Woods regime in 1971. Yet the frequently proclaimedAmerican economic decline was hardly precipitous: between 1957 and 1972, theUnited States’ share of world trade only fell from 16.8 percent to 14.4 percent(see Table 6.3, on p. 123). This gradual change hardly seems sufficient to explain thecollapse of the Bretton Woods regime. Furthermore, the eroding hegemony modeldoes not explain why the United States, rather than its challengers, precipitated theregime’s end on August 15, 1971. After all, it had tried during the Kennedy andJohnson presidencies to maintain the regime, and had used both financial ingenuityand politico-military power. Thus the overall structure model gives us importantbackground for understanding the 1971 regime change; but it does not completelyexplain the change.

Nor does the overall structure approach explain how a new regime of flexiblerates and coordinated intervention could be agreed on in 1976, without the UnitedStates’ return to economic as well as military dominance or another power’s rise topreeminence. We should have expected that if the United States were not strongenough to maintain the Bretton Woods regime (due to erosion of its dominance), itshould hardly have been able to impose a new regime. And without a dominantleader, there should have been no agreement on reform. Instead, there should havebeen a prolonged period of no effective rules, and perhaps even the trade wars,

Issue Structure and Regime Change 117

monetary manipulations, and new mercantilism that were so widely predictedbetween 1971 and 1974.*

Table 6.2 shows how adequate we found the overall structure model to be forexplaining our nine cases of regime change. We found it to be an adequate andelegant explanation of three cases. It is most valuable, as the table shows, for the1945–46 modification of the oceans regime in the decade and a half followingWorld War II.

ISSUE STRUCTURE AND REGIME CHANGE

According to an issue structure model, the strong make the rules; but it is strengthwithin the issue area that counts. Changes in regime reflect shifts in the distributionof power within the issue area. It is important in discussing power in an issue area torecall the distinction in Chapter 2 between two levels of action in world politics. Atthe first level, the international regime is accepted as legitimate, with perhaps someminor disagreements, by all major actors, and politics takes place within the groundrules that it provides. Effective power over outcomes under such conditions willtherefore depend on the nature of the regime as well as on underlying economiccapabilities. Within an effective nondiscriminatory trading regime, for example, theability to impose discriminatory trading restrictions without effective retaliation(that is, comparative invulnerability on this dimension) will not be a usable powerresource in bargaining with the rules of the system.

The second level of political behavior is rule-making; actions at this levelchallenge the regime itself. In such a situation, the rules of the game are questionedby major participants. The regime is no longer a constant but a variable: it is seen asfavorable by some actors, unfavorable by others. This distinction is crucial to anunderstanding of issue structure arguments because different types of powerresources—different power structures—will be relevant at this level. If the policyquestion is no longer how rules should be formulated within the constraints of aninternational regime, but rather how the regime should be designed, a much widerrange of power sources (and therefore of comparative vulnerabilities) becomesrelevant. To continue our example of a trade regime, if nondiscriminatory trade is nolonger assumed, the ability to impose barriers without effective retaliation becomesan important power resource.

*The events of 1971–76 are so recent that any interpretation of them can only be tentative. Someinformed observers have taken a much more skeptical view of the Jamaica agreements than we do. See, forinstance, Tom de Vries, “Jamaica, or the Non-Reform of the International Monetary System,” Foreign Affairs54, no. 3 (April 1976), 577–605. Although no definitive judgment about the value or permanence of the newregime can be made at this time, future developments will provide an interesting test of an overall structuremodel. If the Jamaica agreements collapse, and competitive manipulations of exchange rates or great instabilitybecome prevalent, the expectations of an overall structure model will be realized. We could then infer thatthere was not enough central power to make the regime work. Conversely, if the Jamaica accords succeed andcoordination is fairly effective, the overall structure model will seem less valid in this case. (Note, March 2000:On the whole, skeptics were correct.)


TABLE 6.2 Regime Change: Overall Structure Explanation

DateIssue area Description of change

Accounted for by changes in overallpower structure?


Pre-1920 Oceans Britain established freeseas regime

Only partially. Britain’s naval power,not overall military power, allowed herto set the rules.

1925 Money Britain returned to goldstandard

No. The shift in overall military andeconomic power should have predictedU.S.-centered regime.

1944–48 Money Bretton Woods regime established, but held inabeyance by agreement

Yes. U.S. economic and militarydominance was reflected at the BrettonWoods Conference and subsequently.

1958 Money Bretton Woods regime fully implemented

Partially. U.S. dominance explains to a considerable extent theimplementation of the Bretton Woodsregime, formed by the U.S. Yet theeconomic recovery of Europe was anecessary condition for doing so.

1976 Money Kingston Agreement No. Changes in overall power structure, toward somewhat greaterdiffusion of power, would under theoverall structure model predict noagreement, with hegemony erodedand unitary leadership impossible.*


1931 Money Britain departed from gold standard

No. Economic changes precipitatedthe event. Changes in overall worldpower relations were not pronounced,although the weakness of Britain’sposition helps to account for theregime’s vulnerability.

1945–46 Oceans Extensions following Truman Proclamation

Yes. The U.S. was preponderant in1945, and subsequently bipolarityrestrained the U.S. from using its navaldominance against South Americans.

1967 Oceans Pardo speech; UN became involved

No. Overall power resources of poor andcoastal states did not increase at this time.

1971 Money Bretton Woods regimecollapsed

No. Changes in overall military powerdid not lead to the shift, and overalleconomic power shifts provide only a partial explanation.

* But see footnote, p. 120.


The issue structure approach relies heavily on this distinction. When the underlyingdistribution of power in an issue area is inconsistent with the effective distribution ofpower within a regime, the regime is likely to change. States that are strong in the issuearea but find themselves disadvantaged by the rules of the international regime will try toundermine or destroy the system. Incongruity between underlying power structures andinfluence within a regime provides the dynamic for change.

International Monetary Issue AreaThe issue structure model helps us understand the collapse of the monetary regimein 1931 and makes a major contribution to explaining the breakdown of the BrettonWoods system in 1971. We have seen that the interwar monetary system based onBritain was weak not only because of the shaky world financial situation of the1920s, but also because of the overall political structure that could not effectivelysupport the regime. France made a nuisance of herself, and the United States wasnot prepared to take strong action to help. But there was an inconsistency betweenthe underlying power structure in the issue area and the effects of the rules, whichshowed itself in two ways. Politically, France resented British preeminence in theinternational monetary area, which was symbolized and supported by the fact thatsterling had been returned to its prewar parity with gold whereas the franchad depreciated many times over. Yet the fact that the franc’s value had been setlow—indeed, undervalued—ensured that France could put continual pressure onthe pound. Thus France had political reasons to snipe at the regime. For Britain, onthe other hand, it was difficult at best to maintain the prewar gold parity of thepound; and it became impossible once the banking collapse of 1931 occurred. ThusBritain found that she was helpless within the old rules (because she could notchange the value of the pound in terms of gold, but also could not supply sufficientgold or foreign exchange to meet the demand at the current rate). Yet Britain wasstill a major financial power. Thus when she went off gold and allowed the pound tofloat (or intervened to manipulate the float), her position immediately strengthened.In 1931 it was this inconsistency between underlying power and the constraints ofthe regime that proved crucial as Britain abandoned the gold standard.

We can also use our issue structure model to analyze the evolution of theBretton Woods regime during the 1960s. Under this regime the strength or weaknessof one’s currency, compared with its par value, and the size of one’s internationalreserves were major sources of political strength or weakness. Within the rules of theregime, the United States was in an increasingly weak position in the 1960s as longas it attempted to avoid a run on the dollar and devaluation. Creditor nations withincreasing reserves, such as Germany and Japan, were strong. The United Statestried to persuade them not to use the power that their reserves represented. But asGerman and Japanese reserves increased, although these countries became morepowerful within the assumptions of the Bretton Woods system (in which dollarscould nominally be freely exchanged for gold), those assumptions became increasinglyendangered. Germany and Japan themselves became vulnerable to a dollar devalua-tion, which would reduce the value of their dollar holdings. As Henry Aubrey


pointed out in 1969, “surely a creditor’s influence over the United States rests onAmerican willingness to play the game according to old concepts and rules. If theUnited States ever seriously decided to challenge them, the game would take a verydifferent course.”11

By breaking the rules of the old regime, the United States in 1971 threw offthe regime’s constraints on the exercise of American economic power toinfluence international monetary politics. It was then able to use its fundamentaleconomic power—its strong economy, its low ratio of foreign trade to nationalproduct, and its sheer size—along with its military and political influence, tochange the rules of the monetary game. Having suspended the convertibility ofthe dollar into gold, the United States was no longer hamstrung by the require-ments of convertibility, and found itself in a much stronger bargaining positionafter August 1971 than before.

The difference between changes in the underlying power structure during thefifteen years before the breakdown of the Bretton Woods regime and changes ininfluence within the regime’s constraints can be illustrated by patterns of change inpercentage of world trade and financial reserves for major countries during thoseyears. Any figures such as these must be treated with caution as indices of power;they are very rough approximations at best. Nevertheless, within the Bretton Woodsregime reserve levels were crucial, because one’s currency had to be redeemed atestablished values for gold or foreign exchange. The alternative of allowing thevalue of one’s currency to change was difficult for any country to accomplish, buteffectively impossible (without general consent or a change in the regime) for theUnited States. After 1971, the specter of trade wars or other forms of competitionmade underlying measures of power, such as a country’s proportion of internationaltrade, more important as power resources.

Table 6.3 presents the relevant figures. The United States’ reserve position(indicating its power within the existing regime) dropped much more precipitouslythan its percentage of world trade (indicating its position in the underlying powerstructure). Were figures for gross national product to be used, the continued strengthof the United States would be even more evident. In the early 1970s the UnitedStates still produced between 25 and 30 percent of the world’s goods, compared with13 to 15 percent for the Soviet Union and 7 to 8 percent for Japan.12 The underlyingAmerican position was further strengthened by the fact that trade constituted amuch lower proportion of national product for the United States than for its majortrading partners. The United States was therefore less vulnerable to disruptions inthe international monetary trading systems than its partners were.

These figures reinforce our assertion that inconsistency between underlyingpower and influence within a regime is a source of regime change. The strikingchanges in the international monetary system between 1957 and 1972 cannot beaccounted for by a simple thesis of decline in the American economy, when thatdecline only took the United States from 16.6 percent of world trade to 14.4 percent,and left it with over a quarter of world product. Had the American position reallybecome so weak, the United States would not have been able to force a drasticchange in the international monetary system in 1971; nor would it have seen its


essential views on the nature of a future system prevail in the negotiations leadingup to the 1976 agreement to amend the IMF’s Articles of Agreement. It is theunderlying strength of the United States, in the context of its weak position withinthe pre-1971 regime, that explains the regime change, not American weakness anddecline (whether within the issue area or in aggregate power).

Nevertheless, the issue structure explanation is not perfect. During the 1960sthe delay in adjusting the regime to the underlying structure was considerable; theissue structure explanation accounts for the removal of inconsistency, but not for itsdevelopment in the first place. Moreover, the events of 1971 were followed by otherevents that cannot be explained structurally. The attempt to realign exchange ratesat the Smithsonian Institution in December 1971, but to continue with a fixed ratesystem as under the Bretton Wood regime, failed as transnational money managerslost confidence in the dollar. The magnitude of financial movements, directed firstagainst sterling (June 1972), then against the dollar in February and March 1973,forced a move to de facto floating exchange rates. Eventually, this pattern waslegitimized in the new Articles of Agreement for the IMF agreed upon at Kingston,Jamaica, in January 1976, which “embody the most far-reaching changes in theinternational monetary system since Bretton Woods.”13

These agreements cannot be accounted for by changes in the structure ofpower in the issue area, because that did not change greatly among the majorindustrialized countries during the years in which this agreement was negotiated. Inpart, the 1976 accord can be accounted for by the economic process model.Transnational organizations in the 1970s came to control such large amounts of liquid

TABLE 6.3 Monetary Power Resources: 1957–72

Underlying structure (Percentage of world trade)

Regime-determined structure(reserves as percentage ofworld reserves)

Country 1957 1967 1972 1957 1967 1972

United States 16.8 15.3 14.4 40.1 20.0 8.3

United Kingdom 10.1 8.2 6.9 4.2 3.6 3.6

France 5.4 6.1 7.1 1.1 9.4 6.3

Germany 7.7 9.9 11.5 9.1 11.0 15.0

Japan 3.4 5.6 6.9 0.9 2.7 11.6

Eleven majortrading statesa 62.8 67.6 70.0 69.1 70.9 63.5

aThe five states listed above plus Belgium, the Netherlands, Switzerland, Italy, Canada, andSweden (Group of Ten plus Switzerland).Source: International Financial Statistics (Washington, D.C.: International Monetary Fund, foryears indicated).


funds, and the mobility of those funds was so great, that pegged exchange rates wereextremely difficult, and often impossible, to maintain. A report for the UnitedStates Senate Finance Committee has estimated that in 1971 as much as $258 billionin potentially liquid assets was held by multinational corporations.14 RichardCooper has argued that “large-scale changes in exchange rates (as provided for inthe Bretton Woods regime) are not compatible with the high mobility of fundsprevalent today.”15 Because different patterns of economic change in differentcountries make permanently fixed rates impossible to maintain, he concludes thatsome pattern of flexible exchange rates is essential. Thus economic reality sharplyconstrains political choice.

The economic process model also accounts for some of the incentives thatofficials had during the 1971–76 period to agree on a new regime. Internationaltrade and capital movements are important to all industrialized countries, and somearrangements for regulating those movements were clearly required after theturbulent years of 1973 and 1974. But such incentives existed in 1933 and 1936 aswell, and much less was agreed on. It will be useful, therefore, to go beyond both theissue structure and economic process explanations (however useful both are) and toexamine the political networks among officials that developed during the BrettonWoods regime. Thus the international organization model will contribute to ourunderstanding of recent international monetary politics.

Oceans PoliticsThe issue structure model fits quite well with the early eras of oceans politics.Indeed, when the freedom of the seas regime was established there was a multistatebalance of power in the overall military system, but naval power was unipolar. Inthe early nineteenth century, the British navy was larger than all other navies com-bined, and in 1914, Britain still had nearly as many major warships (192) as thenext three naval powers combined (Germany, 89; United States, 67; France, 52).Moreover, Britain was the major user of the sea. In 1886, half the world’s merchanttonnage (ships over 100 tons) was British, and in 1914, the British merchant fleetstill represented 40 percent of world tonnage (and was four times larger than thesecond-ranking German fleet).16 Britain had both the interest to establish a freeseas regime (except, as we said earlier, in wartime, which she treated as a specialcase) and the structural power to enforce it. This did not mean that force was usedin the normal course of events, but that its use was not deterred when it was occa-sionally necessary to preserve the regime. As one writer described the pre-WorldWar I system,

The naval power . . . loudly proclaims that the seas are free in time of peaceand that the war problem is therefore the only problem outstanding. This istoo strong. Naval domination operates in time of peace in the writing of thelaw for future wars, in the writing of the laws of navigation, and the law ofterritorial waters. . . . The minor maritime state receives . . . little attentionin the drafting of sea law.17


TABLE 6.4 Distribution of Oceans-Related Capabilities

Capabilities Pre-1914 1920–39 1946–65 1966–75

Overall military(measured by expenditures on militaryforce)

Multipolar Multipolar Bipolar Bipolar

Military within issue area(measured by naval forceratios of major naval powers)

Unipolar(U.K.)2:1

Tripolar(U.K., U.S.,Japan) 5:5:3

Unipolar(U.S.)3:1

Bipolar(U.S., U.S.S.R.)1.5:1

Peaceful use: merchantshipping

Unipolar Multipolar Multipolar Dispersed

Peaceful use: fishing Multipolar Multipolar Multipolar Dispersed

One effect of World War I and the massive American naval building programassociated with it (1916–21) was to transform the unipolar prewar naval structureinto a bipolar and subsequently tripolar structure, which was formalized in the5:5:3 ratio of British, American, and Japanese major ships agreed on at the 1922Washington Naval Conference (see Table 6.4). Britain was no longer able toenforce American adherence to the regime. Moreover, the United States was notas interested in adherence as Britain was. After the Harding administrationended the merchant-marine building program, the American merchant fleetdropped to half of Britain’s. Although the United States ranked second in fishcatch, its fisheries were, unlike Britain’s and Japan’s, essentially coastal, notdistant-water. Although the United States (and Britain) usually insisted onadherence by lesser states during the interwar period, the United States wasimperfect in its own adherence, extending jurisdiction for antismuggling controlsin the 1920s and 1930s, exerting strong diplomatic pressure to discourageJapanese fishing on high seas off its coast in the 1930s, and declaring a three-hundred-mile hemispheric neutrality zone after the outbreak of war in Europe in1939. In 1943, the Roosevelt administration began planning to extend jurisdic-tion over the continental shelf and fishery conservation zones. Because of thewidespread citation of the Truman Proclamation as precedent, this extensionproved to be a turning point in the transition from the regime of the first periodto the quasi regime of the second.

After World War II and well into the 1950s, the structure of naval power wasagain unipolar, but with the United States as the preponderant power. The UnitedStates had twice as many major surface ships as second-ranking Britain and thethird-ranking USSR combined.18 Even in 1972, after the growth of Soviet navalpower, the United States still had one and a half times as many major surface ships


and large nuclear submarines as the USSR.19 When American admirals expressedalarm in 1974 that their navy had “lost control of the seas,” Senator Stennis repliedthat the United States still had over twice the tonnage in major surface ships, withgreater range and more weapons than the Soviet navy.20 In short, at the end ofWorld War II, the United States had more naval power than the rest of the worldcombined. In this respect, its position was analogous to Britain’s in 1914. Even atthe beginning of our third period, the United States was the preponderant surfacenaval power, with twice as many carriers and cruisers (92) as all the other powerscombined, and twice as many frigates, destroyers, and escorts (613) as the SovietUnion and Britain combined.21 For much of the postwar period, the United Stateshad the naval capacity that would have been associated with a hegemonic structureof rule-making power in an earlier period.

The underlying power structure in the oceans issue area was consistent in the1920s and 1930s with the existing regime. Freedom of the seas was supported byGreat Britain, the United States, and Japan, although the United States obtainedan exception for measures to curb smugglers. The change in the underlying powerstructure as a result of World War II—with the United States becoming thedominant naval power—accompanied, although it did not determine, the changefrom a free seas regime to a quasi regime in 1945, when the United States assertedextended jurisdiction over fishing zones and the continental shelf adjacent to itscoasts. American policy reflected a lag in decision-makers’ perceptions of theirstate’s role and interest, as we shall demonstrate below; but the United States’ abilityto make such sweeping claims was undoubtedly facilitated by its dominance in navalpower as well as in overall power resources.

The regime change of the post-1967 period, however, is not accounted for bychanges in the underlying power structure. New and weak states led the challenge tothe strong quasi regime of 1945–67. Both the United States, with its continueddominance in oceans capabilities, and the Soviet Union, with its rapidly increasingcapabilities, found themselves on the defensive in negotiations over the governanceof oceans space and resources. Issue structure explanations fail to explain the rapiderosion of the old free seas rules since 1967.

Thus for the oceans issue area, changes in international regimes during the lastten years are less well explained by overall or issue structure explanations thanprevious changes were. The authority of strong states to make the rules for oceansspace no longer goes unchallenged as it did in the prewar or early postwar periods.Although the underlying power structure (naval resources) remains concentrated, itdid not lead to a strong regime in the postwar period. Rather the internationalregime became weaker.

Of the nine cases in Table 6.2, an issue structure model helps to improve ourexplanation of the pre-1920 establishment of the oceans regime and its early erosionin the 1940s, and it accounts for a large part of the regime changes in money in 1931and 1971, which the overall structure model was unable to explain adequately. Yetneither of the two structural models fits well with the recent regime changes inoceans, and several of our questions about changes in monetary regimes in 1971 and1976 remain unanswered.

International Organization and Regime Change 125

INTERNATIONAL ORGANIZATION AND REGIME CHANGE

How do we account for the failure of basic structural models to explain all cases ofregime change well, particularly during the last decade? Their failure is particularlymarked for the oceans issue area. How do we account, for instance, for the inabilityof the preponderant naval state to deter the use of force against its tuna fishermen ina geographic area (Latin America) where its overall hegemonic power was alleged tobe great? During the Cold War, bipolarity in the overall power structure providedpart of the explanation, but it is not adequate for the period since 1967. How do weaccount for the fact that tiny Iceland prevailed over Britain in the cod wars? How dowe explain the fact that the two preponderant naval powers, the United Statesand the Soviet Union, were, after 1967, on the defensive in negotiations over thegovernance of oceans space and resources?

If power were analogous to money in a domestic economic system, thesediscrepancies would rarely occur, and when they did, they would not long persist.Actors strong in overall military power resources would redistribute them to achieveequal marginal utility of outputs across issue areas. Similarly, actors with power atthe underlying structure level of an issue area would try to make the regimes moreconsistent with the underlying structure. In political terms these attempts wouldoften take the form of linkages among issues—improving one’s position where weakby linking results there to an issue in which one was strong. There would be atendency toward congruence between structures and regime—both within issueareas and between overall military structure and various issue areas.

In our monetary cases we found such a tendency toward overall congruence inthe 1940s and 1950s, and within the issue area in 1931 and 1971. Yet in monetarypolitics, and even more in recent oceans politics, incongruities between structureand regime exist. These incongruities suggest that power resources in situations ofcomplex interdependence are neither fully homogeneous nor fungible. Capabilitiesin one area may not be easily translated into influence in another—or even, underexisting regimes and procedures for decision, into influence in the same issue area.One of our most important analytical tasks is therefore to understand the exceptionsand limitations to basic structural hypotheses that rest on assumptions about thefungibility of power and predict high degrees of structure-regime congruence. Or, toreturn to the metaphor we used in Chapter 3, power like water may seek a commonlevel, but the analytical challenge is to understand the heights and strengths of thedikes and dams that maintain separate levels and areas of power in world politics.

The international organization model developed in Chapter 3 helps to accountfor some of these discrepancies between the underlying power structure (overall orissue-specific) and regime change. It assumes political processes typical of complexinterdependence, and an independent effect of rules and norms both within andsurrounding an issue area. Regimes established in conformity with the underlyingpower structure in one period may later develop lives of their own. Underlyingpower resources may be immobilized by norms and political processes so long asthe regime remains in place. For example, the rules of the Bretton Woods regimeimmobilized underlying American monetary power in the 1960s, and allowed


European countries to put more pressure on the United States through the balanceof payments, as De Gaulle did in converting dollars into gold.

According to an international organization model, outcomes are predicted byregime-dependent capabilities; that is, capabilities that are legitimized and madepossible by norms and processes that characterize a regime. It should be clear thatthe power relations in a regime process model are weakly based on sensitivitydependence, and are thus constantly susceptible to being overturned by strongmilitary states or by states that have more power in terms of vulnerability inter-dependence within the issue area. It is remarkable that states are constrained byregimes and organizations at all. Under realist conditions, the overall or issuestructure models should account for regime change, and an international organi-zation model should only help account for regime persistence or lags in thetiming of changes.

A major contribution of the international organization model is indeed toexplain regime persistence, but one can also derive predictions from it about regimechange. In this model, the breakdown or weakening of a regime is explained bychanges in the norms and organizational processes of world politics. A regime maybe altered by the emergence of new norms in other areas of world politics, whichare then transferred to the particular issue area, or by the application of establishednorms (which operate in other issue areas or in particular organizations) to thatissue area. Similarly, a regime may be altered by political bargaining processes thatdiminish the position of the states with underlying power that gave rise to theregime. Or, the development of networks of political interaction, often centered oninternational organizations, may facilitate agreement on new principles for aninternational regime.

As we have seen, if issue structure explanations are added to the overallapproach of traditional theory, they (combined with the economic processapproach) can explain fairly well three of the four cases of regime breakdown orweakening in Table 6.2. Yet the basic structural explanations do not adequatelyexplain erosion of the oceans regime after 1967.

Oceans PoliticsThe erosion of the free seas regime since 1967 has been caused largely by the normsand the political processes of the United Nations. As we noted in Chapter 5, thenorms and procedures of international organizations in the oceans issue areaemphasize sovereignty and state equality. This was true in 1930 and 1958; but forcestill played a greater role in 1930, and the coalition patterns at the GenevaConference of 1958 reflected the overall bipolar division of the world. By the mid-1960s, the two naval powers, the United States and Soviet Union, were lessantagonistic and were both concerned over possible extensions of coastal states’claims to territorial seas. They discussed the possibility of a narrowly definedconference to deal with the issue. The 1967 speech by the ambassador from Malta,anticipating a technological breakthrough that would unlock the treasure chest ofthe deep seabed, not only speeded up the agenda for the great powers, but also recast


the issue more in terms of distributing ocean resources than managing oceans spaceas a public highway. After the establishment of a Seabed Committee, the linkage ofadditional issues by weak states, and the General Assembly call for a Conference onthe Law of the Sea, oceans issues were determined as much by egalitarian organiza-tional procedures and by confrontation between rich and poor nations as by navalpower or oceans capabilities.

The result, according to one observer of the negotiations, was that

major maritime countries no longer control the process. The process is nowcontrolled by the coalition which largely lacks major ocean-related capabilitiesyet seeks to redress inequalities in the distribution of world income via themedium of the ocean. Moreover, this coalition was mobilized, some opponentswould even say “captured,” by two groups: (1) those states pushing the 200-mileterritorial sea claims; and (2) those states ideologically seeking a redistributionof resources and therefore income.22

Patterns of influence in international organizations and conference diplomacyare often quite different from what one would predict from the underlying structure.Moreover, the broader and more general the forum, the greater the divergence islikely to be. The structure of influence in the International OceanographicCommission (IOC) or International Maritime Consultative Organization (IMCO),each with about seventy members and a specific functional jurisdiction, is quitedifferent from the structure of influence in a Law of the Sea Conference with twiceas many members and a virtually unlimited agenda. Negotiating law of the seaquestions in the UN General Assembly resulted in an organization-dependentstructure of capabilities resembling that of the United Nations Conference on Tradeand Development, in which the coalition of less developed countries (the Group ofSeventy-seven) first formed and earned its label. A study of influence in UNCTADin 1969 found the correlation between influence in UNCTAD and structural poweras measured by a general index of overall power was only .43, and as measured byissue-specific power (based on share of world exports) was only .41.23 Edward Milesfound a similar pattern of regime-dependent influence in the UN SeabedCommittee; the Latin American and African groups were most influential, andgroup cohesiveness was a much more important source of influence than countrycapabilities or global status.24

Not only did international organization create a separate organization-dependentstructure of influence among states, but it also weakened the bargaining position of theleading naval power. Potential coalitions at international conferences are notrestricted merely to states. Sometimes, subgovernmental agencies’ interests are morelike those within another country than those of competing domestic agencies.International meetings sponsored by the United Nations provided the physicalcontact and legitimacy for some of these potential transgovernmental coalitions tobecome active. The functional clubs at the Law of the Sea negotiations had this effect.As we saw earlier, American fallback positions in bargaining were often disclosed inadvance. A particularly important instance was the lobbying by United States InteriorDepartment and oil company officials with less developed countries in favor of broad


coastal state jurisdiction over the continental shelf (contrary to then official UnitedStates policy) at the Geneva sessions of the Seabed Committee.25 Besides lobbyinggovernments at international conferences, transnational oil and mining companieshave sometimes formed joint ventures in several countries to affect governments’perceptions and definitions of their interests in hitherto uncharted areas. In Chapter 5we presented further examples of transnational and transgovernmental networksaffecting political bargaining. All these cases indicate that some “domestic” interestsin the leading naval power were not constrained by national boundaries in theirchoice of political strategies or coalition partners.

One should remember that the international organization model does notcompletely ignore the underlying power structure. In oceans negotiations the structureof force lurks in the background. After all, the United States could always refuse toratify the outcome of the conference and could send naval ships to defend, for example,deep-sea mining operations. This possibility enters into the organization-dependentstructure of influence that statesmen weigh in conference diplomacy, but force mustcompete with many other sources of influence peculiar to conference diplomacy. As thepolitics of rule-making in the oceans issue area worked after 1967, however, naval forceplayed a role only after passing through the distorting prism of internationalorganizations. And regardless of whether the United Nations Law of the SeaConference will produce a treaty that will be ratified by most states, by 1976 the freeseas regime had been permanently altered by the political changes best explained bythe international organization model.*

Why did the predominant naval power allow these changes to occur? Theanswer lies mainly in the growth of conditions of complex interdependence. Themultiplicity of issues and channels made the United States’ “national interest” infreedom of the seas more difficult to define and put into practice. At the same time,the fact that using force was more costly for great powers had a pronounced effecton rule-making in the oceans issue area. Unlike the monetary issue area, in whicheconomic power is the basis of the underlying power structure, in the oceans issuearea the traditional structure was based largely on naval force. In recent decades,force, unlike financial power, has become much more costly for great powers to useagainst small states. Its use, or even the public threat of its use, is highly visible,provokes immediate and intense opposition, and frequently contradicts importantdomestic values.

This change is not completely new. Early in the last century,

little headway in restricting belligerent rights was made until Great Britain,under the pressure of humanitarian considerations, the protests and threats ofretaliation by neutrals, complaints from British shipping interests over theuncertainty of their (neutral) rights during the Russo-Japanese War, and otherinfluences, voluntarily began to surrender her more extreme demands.26

*Note (March 2000). A law of the Sea Treaty was negotiated under U.N. auspices in 1982 and is now inforce. Although the United States is not a party to the treaty, it nevertheless conforms its policy to the treaty’sprovisions regarding coastal state jurisdiction.


Changes in public attitudes and interests helped to make force less useful, but theadvent of nuclear weapons after 1945 was more important, particularly for thesuperpowers. As we saw in Chapter 5, as gunboat diplomacy became less usable forthe large states, paradoxically, the smaller powers began successfully using gunboatsin the postwar (but rarely in the pre-war) era. As naval force became more costly forthe great powers, they became more willing to tolerate rule-making politicscharacterized by the organization-dependent power structure rather than resortingto the underlying power structure.

The International Monetary AreaMonetary politics is quite different: issue structure explains the breakdown ofthe regime fairly well, and the new rules that emerged in 1976 were principallydetermined by the major international economic and financial powers. Tosome extent the change has been accomplished through the weighted votingsystem of the IMF; even when votes are not taken, the distribution of votingpower affects results. But it has also been done by taking effective power awayfrom the IMF itself, in particular, by the 1962 decision establishing the Group ofTen (of which only industrialized countries are members) in conjunction withthe General Arrangements to Borrow. Working Party Three of the OECD andthe Bank of International Settlements in Basle were also influential; and “bothgroups were almost co-terminous with the Group of Ten.”27 The SmithsonianAgreement that temporarily ended the crisis of 1971 was negotiated by theGroup of Ten.

Although the agreements of 1976 were developed formally through commit-tees of the IMF Board of Governors, the major industrialized countries dominatedthe process. Indeed, the crucial breakthrough was announced in November 1975,after talks between France and the United States at the Rambouillet summit meet-ings of six major industrialized countries.28 These were then agreed to by the Groupof Ten, and subsequently by the Interim Committee of the IMF.29 At the 1976Jamaica meeting, the less developed countries received some concessions related toborrowing from the fund and proceeds from the sale of gold. Nevertheless, they byno means dominated the process of regime change; instead, they were somewhatperipheral to it.

The contrast with the Law of the Sea Conference is striking. Financial resourcesare concentrated; policies of the major countries can be implemented financially,without resort to force, and in incremental, carefully modulated fashion; and themajor industrialized countries could simply establish their own internationalmonetary system apart from the IMF if that body were to prove too difficult. And inany case, because the Group of Ten countries alone had over 56 percent of thequotas in the IMF (even under the new arrangements that went into effect in1976)—and therefore only a slightly smaller percentage of the voting power—considerable control was maintained even within the organization.30 The generalUN norms of one-state-one-vote do not apply.


The international organization model is not, therefore, essential for explainingthe breakdown of the Bretton Woods regime; and the new regime, developed inJanuary 1976, reflects accurately the underlying dominance of major industrialpowers. Yet to conclude that a basic structural explanation of the monetary areawas entirely sufficient would be to ignore a very important feature of that issuearea. “Controversy over the choice of an international monetary regime,”Richard Cooper says, involves not only differences over goals and distribution ofbenefits, but “uncertainty about the trustworthiness of other countries withregard to their behavior within any chosen regime.”31 Despite high-level con-flicts, a certain degree of trust was built up at the working level during theBretton Woods era. An extensive and deep network of relationships developedamong finance ministers, governors of central banks, and their subordinates.Transgovernmental policy coordination became frequent, along with close inter-governmental ties. Since 1973, informal coordination among central banks hadbecome much closer, as a means of regulating and modulating a flexible exchangerate system, and the major finance ministries were also in constant contact.Indeed, the 1976 agreement on regime change (including changes in the IMFarticles) depended on the belief that further development of close policy coordi-nation among major countries could moderate the effects of flexible rates. Thisbelief was based on the mutual confidence and close ties that were built up overseveral years, beginning with the Bretton Woods regime, and that were disturbedbut not irrevocably ruptured by the Nixon-Connally actions of 1971. The after-math of 1971 was very different from the aftermath of 1931. The InterimCommittee proposed that

the amended Articles of Agreement should include a provision by which themembers of the Fund would undertake to collaborate with the Fund and withother members in order to ensure that their policies with respect to reserveassets would be consistent with the objectives of promoting better internationalsurveillance of international liquidity and making the special drawing right theprincipal reserve asset in the international monetary system.32

Although it is difficult to document the precise importance of these policy coor-dination networks, participants in the system consider them very significant. Thosewho ignore the effects of elite networks created under a previous regime risk misin-terpreting reality.

In summary, the international organization model is less precisely defined thanthe basic structural models. Norms and processes that will be effective for all issueareas are difficult to specify in advance. The predictions of the internationalorganization model are more indeterminate, ruling out certain directions but leavingopen alternate paths in the direction to which it does point. It is definitely asupplemental approach, to be used when simpler and more determinate structuraland economic process models used alone would distort reality. Yet, as we have seen,particularly for the oceans issue area, and in some significant ways for monetarypolitics, the international organization model provides insights that are crucial tounderstanding the politics of regime change.

Limits of Systemic Explanations: Domestic Politics and Leadership 131

LIMITS OF SYSTEMIC EXPLANATIONS: DOMESTICPOLITICS AND LEADERSHIP

Systemic explanations are limited. They cannot explain, for example, why powerfulstates sometimes do not use their resources to direct or control international regimes,as for instance, in the case of the United States’ international financial policy duringthe 1920s. The theory of eroding hegemony is only a partial explanation. We need tointroduce lags in perceptions behind changing events, and such lags can be explainedonly by taking account of domestic politics in the great powers and the domesticeffect of transnational relations. This limitation affects all of our systemic models, butparticularly the two structural ones that focus on the basic power capabilities ofstates. The international organization model at least points us toward the politicalprocesses typical of complex interdependence, in which the line between domesticand international politics is blurred.

A theory of leadership lag helps to explain one of our cases—the anomalouscase of money after World War I—and also helps us understand the beginning of theerosion of the oceans regime. Charles Kindleberger has suggested that in periods oftransition in the underlying power structure of an issue area, a newly powerful statewill develop the capability for leadership before it perceives the benefits to be gainedand the necessity for its leadership. Furthermore, secondary powers, used to takingleadership for granted, are likely to pursue policies that weaken the system. Thus,between the World Wars, the United States failed to exercise internationalfinancial leadership, leaving this task to a weakened Britain; and France “soughtpower in its national interest, without adequately taking into account the repercussionsof its positions on world economic or political stability.”33

After World War II, however, the United States seized world leadership on inter-national monetary questions. After 1947, this leadership was reinforced by the impactof the Cold War and politico-military bipolarity, as discussed in the previous section. Ahierarchy of issues was established, headed by national security. Exercising leadershipon international financial issues was part of the overall strategy of building militarilyand economically strong allies in Europe and Japan. Building a stable internationalmonetary system was obviously crucial to success in the larger design, and short-termneomercantilist interests were not allowed to interfere, in the first twenty or so yearsafter World War II. By 1971, ambiguity had arisen. While officials in the state andtreasury departments were announcing to Congress the subordination of internationalmonetary policy to national security policy, President Nixon was publicly justifying hisactions to force devaluation on the grounds of creating jobs. Until at least that point,however, American officials’ beliefs in the need to exercise leadership, and to keep thedollar strong, had been strong motivations for using the underlying power resources ofthe United States to maintain a dollar-centered international monetary regime.

Kindleberger’s theory of leadership lag was designed to apply to the interwarmonetary system, where it certainly contributes to our understanding of regimechange. It also helps to account for American behavior in the oceans issue area atthe end of World War II. Throughout the prewar period, Britain had been the leaderin preserving the regime structure. The United States had not only been something


of a free rider, but had demanded exceptions to the regime when strong domesticinterests such as prohibitionists and the Justice Department or West Coast salmonfishermen pressed their demands on Congress and the president. The TrumanProclamations of 1945 arose out of the domestic politics of the fishermen’s lobby andthe domestic interests of the oil industry in offshore drilling. Leadership was takenby the Interior Department. The published documents indicate that the navy didnot play a significant role; and the State Department played only a secondary one.34

In a sense, the Truman Proclamations were a leftover from the 1930s. In 1945, theUnited States was the de facto leader, but its leadership perceptions were still thoseof a free rider until Latin American imitators shocked it into new perceptions of itssystemic interest in regime maintenance after 1946.

In both the monetary and oceans issues, attempts to exercise leadership, oncethe need for it was perceived, were complicated by the diversity of interests involved.In the oceans issue area the diversity of interests increased dramatically after WorldWar II with the growth in its complexity. Whereas fishing and navigation were themajor uses of the oceans before the war, after 1945 the rise of new issues such asoffshore drilling, deep-sea mining, and ecological protection confronted the UnitedStates government with a large array of “domestic” groups and corporations thatwere concerned about oceans policy. Moreover, one of the new issues, offshoredrilling, reinforced coastal rather than high seas interests, and the most valuableAmerican fishing was coastal rather than in distant waters. Unlike British leadership,which faced a happy coincidence of its security and economic interests, Americanleadership of a free seas regime suffered from internal cross-pressures.

In the monetary area, two American policies tended to damage domestic interests:allowing Europe and Japan to discriminate against the dollar, and thus againstAmerican goods; and maintaining a stable value for the dollar even as Europe andJapan regained their competitive position. Import-competing industries, andworkers in those industries, were particularly hurt by those policies. As the UnitedStates’ balance of trade slipped into deficit and the unemployment rate rose in thelate 1960s and early 1970s, protests against this situation rose, although they at firsttook the form of complaints on the trade side, not the monetary side. The AFL-CIObecame protectionist; pressures for quotas on textile and steel products increased.

In the face of these pressures, perhaps what is most remarkable, both in oceansand monetary policy, is not the exceptions but the extent to which American policywas defined in systemic terms, with the United States cast in the role of leader. Onthe whole, the navy, distant-water fishermen, and shippers were able to define “thenational interest” in oceans policy in a classical maritime fashion between 1947 and1972. Until 1971, the New York financial community’s attitudes, as reflected in theviews of the Federal Reserve Bank of New York and a succession of high governmentofficials from Wall Street, were reflected in postwar American internationalmonetary policy. In 1971, however, it was not a banker who advised Nixon to takestrong action, but “Mr. Peter Peterson, ex-president of Bell and Howell, a midwestcorporation which became a conglomerate by being driven out of its originalphotographics by Japanese competition.”35 And the treasury secretary was a manwho had risen through Texas politics, not the Wall Street financial route.

Limits of Systemic Explanations: Domestic Politics and Leadership 133

In both oceans and monetary policy, organizational or economic interestbuttressed a case for systemic leadership that was attractive to globally orientedpolitical leaders. It is not that distant-water fishermen, shippers, and the navydetermined oceans policy themselves, or that the bankers controlled monetarypolicy absolutely; but that as long as opposition to these groups was not very strong,they benefited by being able to identify their preferences with contemporarypolitical conceptions of America’s role in world affairs. The particular interests ofdomestic groups and the perceived national interests of the political leadershipreinforced each other, although more consistently in international monetary affairsthan in oceans policy.

This brings us to the question of domestic actors’ political strategies, as theyaffect international leadership. Different groups have different interests, which inprinciple are hierarchically organized by policy decisions and dressed up with thecloak called “national interest.” However, as we noted earlier, the politics ofinternational organizations and conferences sometimes provide opportunities for defacto or active coalitions of national groups whose mutual interests differ from thathierarchy. Domestic groups compete to allocate issues among international forums;to link or separate issues. In the process they politicize the issues, stimulating theattention of a broader range of interest groups and bureaucracies. As a result, thenational strategies of major states may not be shaped simply by perceptions aboutinternational system leadership, but by domestic interests. Predictions aboutcongruence between international structure and international regimes may failbecause key domestic actors in major states capture the policy process and turnpolicy toward their interests, and against the politico-military interests or theaggregate economic interests, by which realist theory assumes states are guided.*

In the oceans issue area, domestic actors’ strategies, particularly those ofprohibitionists and fishermen, had a major effect in the prewar period, but between1946 and the late 1960s, the navy was more effective, and United States policy wasoriented toward leadership of the system.** Since 1967, as Ann Hollick has shown,the politics of rule-making through international organizations and conferences hasled from international to domestic politicization of the issue, has aroused andinvolved a broader range of domestic interests, and has subsequently strengthenedthe position of coastal interests in the United States.36 The national interestexpressed in the United States policy enunciated in May 1970 largely reflected theview of the navy with its strong emphasis on security and free seas. Subsequently,the American position was considerably transformed as domestic actors with coastalinterests interacted with resource-oriented weak states, which promoted broadlinkage of issues to improve their bargaining positions. In a sense one can imaginethe Law of the Sea negotiations as consisting of national positions, which are

*To some extent this is the old issue of the difference between “systemic” and “national” determinants ofinternational politics. For a general discussion with references, see K. J. Holsti, International Politics: AFramework for Analysis, 2d ed. (Englewood Cliffs, N.J.: Prentice-Hall, 1972), pp. 353–400.

**In 1948, fishery interests pressed for the creation of a bureaucratic ally in the State Department. Untilthe 1970s the resulting position of special assistant for fisheries and wildlife was generally held by personspreviously associated with distant-water fisheries.


cross-cut by two large potential coalitions, one coastal and one maritime. Theexistence of these potential coalitions influences national positions over time asgovernmental subunits or nongovernmental actors pursue strategies that stretch andstrain the bounds of national policies.

In the international monetary policy issue area, political strategies by domesticgroups were more muted. The Treasury and State departments have vied fordominance; and nongovernmental organizations with direct interests in the area,such as banks and multinational corporations, have expressed policy views. Butthere has been more public controversy about trade issues and the activities ofmultinational corporations. Monetary issues tend to be more technical than tradequestions, and their effects seem less easy to understand or to assess than those oftextile imports or a runaway plant. Representatives from labor unions or importcompeting industries can more readily identify the benefits from import quotas, oran expanded adjustment-assistance program, than from devaluation of the dollar.Analysts often observe that even when, from an economic point of view that takesinto account the long-run general interest, political actors ought to be discussingexchange rates, they are in fact talking about restraints on trade or investment.

Economists have used the term money illusion to refer to popular attention towages and prices expressed in monetary rather than real terms. Analogously, andparticularly under the stable fixed rate regime of Bretton Woods, there has been apolitical money illusion; political groups have paid less attention to the welfareconsequences of monetary policy than to the more readily apprehended trade policy.Whether this political money illusion is weakening after the events of the 1970s andunder flexible rates is an important question for the future. Thus far the uncertaineffects of monetary changes, particularly for people who do not understand thetechnicalities involved, provide strong incentives for political actors (who are oftenoriented toward the short run anyway) to focus on specific trade and investmentmeasures designed to correct immediate problems. Congress, and groups with accessto it, usually stress trade and investment policy rather than monetary policy.

We have defined politicization as increasing controversiality and agitation thatraises an issue’s priority on the policy agenda and the level of government at which itreceives attention. Roughly speaking, politicization that leads to top-level attentioncomes from two directions: from below (domestic politics, whether popular, legislative,or bureaucratic) and from the outside (the activities of other governments andinternational organizations). The way in which issues become politicized affects thegovernment’s ability to adopt an international systemic perspective rather than adomestic perspective. Postwar money and oceans provide an illuminating contrast.

Overall, of course, international monetary policy, as well as oceans policy,became much more highly politicized in the 1970s. But in the monetary area,politicization was principally a result of international systemic crisis, in whichconditions for maintenance of an international regime were increasingly inconsistentwith economic and political realities. It was not caused by domestic group strategies.In the oceans policy area, by contrast, politicization was initially a result of othergovernments’ strategies, particularly those of less developed nations, which opposedthe constraints of the old regime and therefore opened the issue area to competing

Conclusion 135

proposals for new sets of rules. Their strategies stimulated the other source ofpoliticization, domestic actors, which responded to their own changing interests andto the new problems and opportunities created by the foreign governments’ actions.The combination of foreign and domestic pressures increasingly constrained theUnited States government from adopting a systemic leadership approach.

Our discussion of international leadership has turned out to be complex.Leadership is affected not only by perceptions of top officials but also by domesticand transnational groups and organizations. In the oceans area, perceptions wereslow to change and the Truman Proclamations, which reflected the domesticpolitics of the 1930s, contributed to a process of regime erosion that worked againstthe international systemic interests of the United States. As politicians and officialsbegan to view the United States as a system leader, the position of groups andorganizations with interests in a free seas regime was reinforced, but theirdominance was weakened again in the 1970s as increasing domestic politicizationand transnational coalitions brought these policies under attack. In conjunctionwith the opportunities provided by international negotiations on oceans questionsafter 1967, the activities of these groups made it more difficult for the United Statesgovernment to take a coherent stand; thus, it is more difficult for the analyst topredict United States behavior on the basis of a structural model.

CONCLUSION

We said in Chapter 3 that analysis should start with the simplest possible explana-tion, and add complexity only as necessary to fit reality. Adequate explanation willoften require a combination of models. The simplest and most familiar combinationis of the economic process and overall structure models. Indeed, this combinationunderlies many traditional analyses. As Table 6.5 indicates, this combination ofmodels accounts very well for three cases (oceans, 1945–46; money, 1944–48;money, 1958), and quite well for the establishment of the oceans regime before1920. Yet five cases of regime change, including the three most recent ones, are notwell explained by this formulation. Britain’s decision to return to gold in 1925requires one to take domestic politics and leadership lag into account. The collapseof sterling in 1931 was affected by economic processes in the context of politicalweakness; but it was also strongly influenced by the particular pattern of relation-ships within the issue area, as a result especially of the undervaluation of the Frenchfranc relative to sterling. There was an incongruity between the underlying power ofstates and the provisions of the de facto international regime, which Britain couldchange by allowing sterling to float. Likewise, the structure of power within the issuearea is important for an explanation of the events in 1971. Once again, the rules ofthe regime were inconsistent with the underlying power structure. In both of thesecases, our issue structure model was most relevant.

The combination of overall structure and economic process models also doesnot explain the shift in the oceans regime after 1967. Here the political processesof international organizations were the most important. Finally, the overall


TABLE 6.5 Regime Change: Economic Process and Overall Structure Models

Date Issue area Accounted for by combination of these two models?


Pre-1920 Oceans Yes. Economic factors explain incentives to act. Overall structureexplains Britain’s ability to act, with some modification torecognize Britain’s particularly strong naval position, as opposedto her overall military position.

1925 Money No. Postwar American military and economic power wouldpredict an American-centered regime. Perceptions from previoushegemonial situation and leadership lag are necessary forexplanation.

1944–46 Money Yes, particularly by the overall structure model. There isAmerican economic and military preponderance.

1958 Money Yes. European economic recovery occurs in a context ofcontinued American overall power.

1976 Money No. The economic process model indicates incentives to agree;but the overall structure model mispredicts results. Analysis ofpolitical networks is required.


1931 Money Only partially. One needs to look at power relations within theissue area, partly as a result of the undervaluation of the francin relation to sterling, to get an adequate explanation.

1945–46 Oceans Yes. The economic process model indicates new problems andincentives for the U.S.; the overall structure model explainswhy the U.S. had power to take its action; and why it did notstop South American extensions.

1967 Oceans Partially; perceptions of anticipated benefits due totechnological change were important. But the overall structuremodel fails. Political processes of international organizationsare important.

1971 Money Partially; technological change, and changes in overall economiccapabilities, contributed. But one must examine changes in theissue area structure of power, and incongruities between underly-ing resources and the rules of the regime.

structure approach does not adequately explain the reconstitution of the interna-tional monetary regime in 1976, since neither overall military nor economicpower became much more concentrated between 1971 and 1976. Knowledge ofthe overall capabilities of major states, and their policy preferences, would havebeen insufficient to predict the regime outcomes. On the basis of those factors in

Conclusion 137

TABLE 6.6 Power of Overall Structure and Economic Process Models

Conditions in the Issue Area

Explanatory powerNearer to realism

Nearer to complex interdependence

High Oceans, pre-1920

Oceans, 1945–46

Money, 1944–48

Money, 1958

Low Money, 1925

Money, 1931

Oceans, 1967

Money, 1971

Money, 1976

1971–72, one should have predicted a restored fixed rate system, with adjust-ments in exchange rates in favor of the United States. This was the immediateresult of the December 1971 Smithsonian accord, but it was incompatible withthe rapidly increasing volume of international financial flows and with changesin international banking. Britain’s decision to float the pound in June 1972 andthe eventual floating of the dollar in March 1973 were prompted by the specterof rapid fund transfers that major central banks did not believe they couldcontain. The economic process model correctly points to the incentives thatgovernmental officials had for reaching agreement, and American strength in theissue structure of power accords quite well with the outcome. But without ananalysis of the political networks among major countries, which developed underthe Bretton Woods regime, one cannot explain why these incentives should havebeen so much more effective in 1971–76 than they were in 1931–36.

Table 6.6 shows how well the overall structure model, combined with theeconomic process model, explains regime change, under conditions approximatingrealism and complex interdependence. One can see that the explanatory power ofthese traditional models is high for situations close to the realist ideal type, but notfor conditions closer to complex interdependence.*

*The full application of Bretton Woods rules after 1958 is possibly a deviant case since force was notdirectly used and multiple channels existed in the issue area. Table 6.6 assumes, however, that the role of forcethrough linkage to overall American hegemony in the Western alliance—as discussed in the last chapter—represented conditions closer to realism.


Table 6.6 suggests three important propositions, which cannot be definitivelyproved on the basis of two issue areas, but which are supported by our study ofmoney and oceans.

1. With respect to trends in the conditions of world politics over the past half century,the complex interdependence ideal type seems to be becoming increasinglyrelevant. The three most recent cases are all closer to complex interdependencethan to realism.

2. With respect to the relevance of theories of world politics, it seems quite clear thattraditional theories based on overall structure models and economic processmodels explain regime change under realist conditions much better than undercomplex interdependence conditions. The traditional models are particularlyweak for explanations of recent cases in which the conditions of complexinterdependence, on the whole, applied.

3. These two propositions together imply that traditional theories of world politics,as applied to oceans and monetary politics, are becoming less useful, and that newtheories based on issue structure and international organization models willfrequently be needed for understanding reality and framing appropriate policies.

Regardless of how well these propositions are substantiated, or how extensivelythey are qualified, by subsequent studies of other issue areas, we should rememberour earlier warning that trends toward conditions of complex interdependence arenot irreversible. Not only does the cyclical pattern we discovered in money provethe point, but an intense threat to any major state’s military security wouldundoubtedly affect conditions in many issue areas and increase the relevance ofoverall structure models.

Nor does approximation to conditions of complex interdependence implythat the politics of different issue areas will be the same. On the contrary, wefound that although aspects of an international organization model help toaccount for recent changes in the monetary area, an issue structure modelexplains them most fully. In oceans, this was not the case. As we saw earlier, atboth the underlying and regime-determined levels, the distribution of powercapabilities in the monetary area remained quite concentrated. In oceans, on theother hand, as underlying power resources (naval force) became constrainedunder conditions of complex interdependence, the procedures of internationalorganization became more important.

We also found that the patterns of politicization in the two issues were quitedifferent. Much of the politicization in oceans tended to be from “below,” insidedomestic American politics, thus constraining the freedom of the dominant govern-ment actors to implement policy. In money, on the other hand, politicization hasgenerally been from outside, allowing the implementation of a more systematicallyoriented policy. Because of this pattern, money received more consistent presidentialattention than did oceans, and consequently a coherent government policy waseasier to maintain.

Conclusion 139

Finally, management of a stable international monetary system comes close tobeing a public good; that is, all states can benefit from it without diminishing thebenefits received by others. To the extent that states perceive a public good fromwhich they all gain, they tend to be more willing to accept leadership. In earlier eras,when the major use of the oceans was a public highway, management of oceansspace and resources was also frequently perceived as being a public good, asindicated by the British memorandum quoted in Chapter 4. With technologicalchange and the dramatization of oil and mineral resources after 1967, oceans politicsfocused more on distributional questions and how to fence or prevent fencing offparts of the global commons. Under these conditions, many states no longer sawgreat power leadership in maintaining a free seas regime as a public good, and thusmaintaining the regime became more costly for the great power.

Our conclusion from this comparison of the politics of regime change in oceansand money is not that one simple model can be replaced by another, but that inter-national political analysis will have to become more discriminating. An eminenteconomist has said that a member of his profession, like a dentist, needs both a bagfull of different tools and the discrimination to know which to use at the righttime.37 The same is true of political analysis. Our conclusion is that the traditionaltools need to be sharpened and supplemented with new tools, not discarded.


141

� CHAPTER 7 UNITED STATES RELATIONS WITH CANADA ANDAUSTRALIACanadian-American Relations and Complex InterdependenceAustralian-American Relations and Complex InterdependenceIdentifying Issues and Outcomes: Canada–United StatesIdentifying Issues and Outcomes: Australia–United StatesComparing the Politics of Agenda FormationAccounting for Differences in OutcomesRegime Change: Alternative Explanations

Regimes and Two BilateralRelationships

IIIPART


143

The concept of complex interdependence—defined by the absence of force, thelack of hierarchy among issues, and the presence of multiple channels of contactbetween societies—is an abstraction rather than a description of reality. Insofar asan actual situation approximates these ideal conditions, we expect to find a politicsof complex interdependence as outlined in Chapter 2. We found many features ofsuch a politics in the issue areas of oceans and money. Yet neither issue area fit theconditions of complex interdependence perfectly. In the last chapter we discoveredthat when the conditions of complex interdependence were approximated moreclosely, the overall structure model was least useful for explanation, and issue struc-ture and international organizational explanations became more useful.

Our approach in this chapter will be different from that in Part II. First, we arecutting into the reality of interdependence from a different direction by comparingrelationships between countries rather than global economic issues. Second, wedeliberately chose a case—Canadian-American relations—that seemed most likelyto fit the three ideal conditions of complex interdependence. We do not considerCanadian-American relations a typical case from which to generalize about worldpolitics. We chose to examine a half century of Canadian-American relationsbecause it would allow us to examine the political processes of complex interde-pendence in practice: to see how they have changed over time, and how they affectthe outcomes of high-level political conflicts in which military force plays no role. Ifthere were no significant effects in such a “most likely case,” then, even withqualifications for differences of degree, our expectations about political processes ofcomplex interdependence would probably not be very fruitful for broader analyses ofworld politics.1

We would like to go further and have a series of studies that would allow us tosay how broadly the generalizations about complex interdependence in theCanadian-American case could be extended. What are the effects, for example, ofpolitical friendship, cultural distance, or different levels of economic development?

United States Relationswith Canada and Australia

7CHAPTER

143

144 Chapter 7 United States Relations with Canada and Australia

Such ambitions are beyond the practical scope of this volume. Instead, we chose asecond case—Australian-American relations—that would at least allow us to holdsome factors constant while we looked at the effects of international differences thathelp us compare the predictive power of different theories. We chose Australiabecause of its cultural and political similarities to Canada, allowing us (as best onecan when the real world is the laboratory) to hold constant the effects of size,general economic characteristics, and domestic political systems, while we look atthe effects of differences in the two countries’ military security and at the costlyeffects of geographical distance.2

In other words, we have chosen two cases that differ in their approximation ofcomplex interdependence while being as similar as possible in other ways. TheAustralian case is much further than the Canadian one from complex interdepend-ence. In both cases, political conflicts are resolved without resort to military force.In Australian-American relations, however, military security has clearly dominatedthe agenda, the protective role of military force has remained crucial, and distancehas limited the multiple channels of contact. As one observer has said, “Think of aCanada that had been towed away from where it is, and moored off Africa, and theproblem of Australia’s physical location becomes clear.”3

Distance, of course, has other effects as well. The proximity of the United Statesand Canada has generated issues—such as those having to do with the St. LawrenceSeaway, airborne pollution, and smuggling—that would not be found among moredistant partners, no matter how extensive their relations were. Furthermore, in thenuclear era a shared fate binds the United States and Canada. Canada would beseverely damaged by an all-out nuclear attack on the United States, regardless ofwhether she was herself meant to be a target of such an attack. Nevertheless, thesecases are matched closely enough to allow us to search for the effects of complexinterdependence on bilateral relationships.

Because of the differences between them, we should not be surprised that thepattern of outcomes of interstate conflicts in the Canadian-American case contrastswith that in the Australian-American relationship. We shall show that part of thedifference is accounted for by the political processes of complex interdependencepresent in the Canadian case. At the end of the chapter we shall show how, even inCanadian-American relations, structural and economic process models contributepart of the explanation of outcomes and regime. First we must decide how closelythe two cases approximate the conditions of realism and complex interdependenceand demonstrate how the political processes predicted by each ideal type affectedthe pattern of outcomes of political conflicts.

CANADIAN-AMERICAN RELATIONS AND COMPLEXINTERDEPENDENCE

In general, Canadian-American relations fit closely the three conditions of complexinterdependence set forth in Chapter 2. Military force plays only a minor role in therelationship.4 Two early American military invasions of Canada are regarded today

Canadian-American Relations and Complex Interdependence 145

as ancient history. Though occasional fears of American military invasion lingereduntil the eve of World War I, the fear of military threat was probably over by 1871,and certainly by 1895. The last official Canadian military contingency plan fordefense against an American invasion was an historical curiosity by the time it wasscrapped in 1931.5

As we argued in Chapter 2, the absence of military force as an instrument forachieving positive goals does not mean that military force has no role. Since WorldWar II, the Canadian-American military alliance against external threat has been asource of both close cooperation and serious friction. Some of the most far-reachingsteps toward continental cooperation occurred during wartime.6 Similarly, one ofthe most serious crises in postwar relations, and one that led to the fall of a dividedCanadian government, was over the nuclear arming of missiles involved in jointCanadian-American defense against the Soviet military threat. But military threats,or even threats of withdrawing military protection, have not characterized thebargaining process.

We also noted in Chapter 2 that military force can sometimes play a latent role. Itspossible use can set significant structural limits on the political process. Such limits, ifthey exist, are extremely broad and not very constraining in the Canadian-Americanrelationship. One might stretch one’s imagination and conceive of situations in whichmilitary force might be used, but such speculations are hardly credible. They onlyremind one of the Red Queen telling Alice in Wonderland that she could think of siximpossible things before breakfast every day.

Canadian-American relations are also notable for the multiple channels of con-tact between the two countries. Each country is the other’s most important tradingpartner. Each year some 38 million Americans travel to Canada and some 34 millionCanadians visit the United States. In the 1970s there were between 20,000 and30,000 permanent immigrants in each direction. American magazines and televisioncapture a large portion of Canadian attention. In the late 1960s American residentsowned about 29 percent (by value) of Canadian corporations involved in manufac-turing, energy, mining, railways, utilities, and merchandising. In manufacturing, thefigure was 44 percent.7 Moreover, as Table 7.1 shows, many of these societal connec-tions have increased since 1920.

The two governments, as well as the societies, have multiple points of contact.About thirty-one American federal agencies and twenty-one Canadian counterpartsdeal directly with each other, as do some states and provinces.8 A study prepared forthe Canadian Parliament found that in 1968 there were about 6,500 visits back andforth across the border by government officials from the two countries. Only 139 ofthese visits were to or from the Canadian Department of External Affairs.9 Thetelephone is another channel of direct contact. In one week in November 1972,there was a daily average of 340 calls between the United States and Canada onthe United States government’s Federal Telephone Service toll-free lines.10 Theclassical image of governments interacting through their foreign offices is clearlyinappropriate in the Canadian-American case.

Finally, the agenda of Canadian-American relations shows a broad range ofissues without a preponderance or domination of military security concerns. Because


TABLE 7.1 Selected Transnational Processes: United States–Canada

Immigration

Year U.S. to Canada Canada to U.S.

1920 40,000 90,000

1938 6,000 14,000

1953 9,000 46,000

1962 11,000 44,000

1971 23,000 23,000Visits (millions)

Year U.S. to Canada Canada to U.S.

1920 Nd nd

1938 Nd nd

1953 28 23

1962 32 30

1971 39 34Trade ($ millions)

YearCanadian exports to U.S.

Percentage of totalCanadian exports

U.S. exports to Canada

Percentage of total U.S. exports

1920 581 45 921 12

1938 279 33 460 15

1953 2,463 59 2,940 19

1962 3,608 57 3,970 22

1971 11,665 66 10,951 21Investment

YearU.S. long-term inCanada ($ billion)

U.S. as percentage offoreign investment

1920 1.6 (1918) 36

1938 4.2 (19399) 60

1953 8.9 77

1962 19.2 77

1971 28.0 (1967) 81

Source: M. C. Urquhart, ed., Historical Statistics of Canada (Toronto: MacMillan, 1965); Statistics Canada, Canada Year Book (Ottawa: Information Canada, various years); StatisticsCanada, Canada’s International Investment Position, 1926–67 (Ottawa: Information Canada,1971); United Nations Statistical Yearbook (New York: United Nations, 1961, 1971).

Canadian-American Relations and Complex Interdependence 147

TABLE 7.2 Interstate Interactions with Canada, 1920–46

1920s (n = 64) 1930s (n = 92) 1940–46 (n = 119)

Issue Area (government objectives)

Military 3% 5% 44%

Political 8 10 20

Social 16 20 6

Economic 72 65 30

Level of Attention in United States

President 12.5% 15% 16%

Cabinet officers 75 34 20

Other officials 12.5 50 64

Source: Foreign Relations of the United States (Washington, D.C.: U.S. Government PrintingOffice, 1920–46).

of the multiple contacts described above, it is virtually impossible to map the entireagenda of relations, but for 1920–46, we can map the relationship described indiplomatic documents (see Table 7.2).

The documents show a high preponderance of economic issues on the interstateagenda (except for the war years); and a tripling in the average number of annualinteractions from 6.4 per year in the 1920s, through 9.2 per year in the 1930s, to17 per year in the early 1940s. As the agenda became more complex, the proportionof issues coming before the president increased somewhat, but the most dramaticchange was the decline in the proportion of issues handled by cabinet officials(primarily the secretary of state) and the rise in the proportion handled by thebureaucracy. If we limit ourselves to the president’s public agenda, indicated byPublic Papers of the President, we find social and economic issues comprising a majorportion of the annual references to Canada except in wartime (Table 7.3).

Not only have socioeconomic issues been prominent, but it has often been dif-ficult to establish and maintain a consistent hierarchy among issues. In the experi-ence of an American official,

Neither country has found it possible to list formally, with meaningful consen-sus, its priorities toward the other in any specific form. It could not be donewithout simultaneously applying corresponding priorities to aspects of domesticpolicy, and consequently to constituent groups. . . . “Country papers,” “policyanalysis and resource allocation papers,” and so forth have some discipliningvalue when the components are principally active in foreign affairs. They canbe little more than bureaucratic exercises when intended to discipline as wellsome of the major “domestic” departments and regulatory boards.11


Although high-level attention from the president or a preponderant cabinetofficial such as Treasury Secretary Connally in 1971–72 can temporarily impose a setof priorities on the agenda’s multiple issues, it is almost impossible to maintain thehigh level of attention necessary to enforce coherence and consistency. Thus therealist assumption of a consistent hierarchy of national goals with security at the topdoes not fit the Canadian-American case.

Ever since World War II the Canadian-American relationship has been governedby a regime based on alliance, constant consultation, and prohibition of overt linkageof issues. Although the regimes that govern bilateral country relationships are muchbroader and more diffuse than those which affect the issue areas we discussed in Part II,the weakness of the formal institutions in a relationship such as that between theUnited States and Canada does not signify the absence of a regime or of internationalorganization in the broad sense in which we have defined it. On the contrary, diplomatsand close observers were quite able to describe the expected procedures and rules of thegame. Indeed in 1965, at the behest of President Johnson and Prime Minister Pearson,ambassadors Merchant and Heeney summarized the procedures for consultation withinthe alliance that came to be called quiet diplomacy.12 And the avoidance of overt link-age is described in the words of another experienced diplomat: “marginally you mayshade a deal to create goodwill, but basically each deal must stand on its own.”13

This postwar regime is not immutable. In the prewar era, although force was notused and economic issues dominated the agenda, the procedures in the relationshipwere quite different. Moreover, both sides frequently linked unrelated issues forbargaining purposes, although the Americans did it more successfully. The postwarregime, with its symbolism of a common cause and its constant consultation,developed in response to the German threat in World War II and the subsequentSoviet threat during the Cold War.

Again in the early 1970s, it seemed that the regime norm against linkage would bealtered. In the later 1960s, the doctrine of quiet diplomacy had come under considerablecriticism from nationalistic elements of the Canadian public. As we shall see,the increasingly nationalistic and assertive Canadian bargaining approach of the 1960s

TABLE 7.3 Economic and Social Issues as Percentage of Annual References toCanadaa

PeriodTotal number of references to Canada Percentage

Roosevelt to 1940 16 80

World War II 16 23

Truman after 1945 36 65

Eisenhower 36 55

Kennedy-Johnson 52 55

aPurely pro-forma and goodwill statements were excluded.Source: Public Papers of the President (Washington, D.C.: U.S. Government Printing Office,1933–69).

Australian-American Relations and Complex Interdependence 149

had positive results, at least in the short run. Outcomes of issues increasingly reflectedCanada’s position. But in response, the United States Treasury in 1971–72 took the leadin “getting tough with Canada,” politicizing trade issues, linking them to other concerns,and attempting to control the transgovernmental contacts of other agencies. At thesame time, the Canadian government was itself trying to exercise greater control overtransnational and transgovernmental relations.14 Somewhat surprisingly, the efforts onboth sides to politicize issues and centralize bargaining did not persist long enough toalter the regime fundamentally. Transgovernmental interactions continued, and overtlinkages again became rare. For example, a 1971 effort by the United States Treasury tolink American acceptance of Canadian oil to Canadian willingness to renegotiate theauto pact now seems as striking in its rarity as in its ironic timing. We shall explore therelationship between regime and outcomes in greater detail later in this chapter.

AUSTRALIAN-AMERICAN RELATIONS AND COMPLEXINTERDEPENDENCE

Since most Americans—even many American students of international relations—have only a dim awareness of relations with Australia, we begin this discussion ofAustralian-American relations and complex interdependence with a brief review ofthese governments’ policies toward each other since 1920.

During the 1920s, governmental as well as transnational transactions wererather low, but the 1930s became a period of acrimony in relations across the Pacific.Australia was involved in trade arrangements developed for “imperial preference”within the British Empire. These trade arrangements raised tariff levels for outsidersto encourage intra-Empire or intra-Commonwealth trade.

As a result, Australia built up considerable resentment among European countriesthat traded heavily with Australia and usually had an unfavorable balance of tradewith Australia. . . . Rather than reduce imperial preference margins, however, theAustralian government [in 1934] turned to what appeared to be an easier solution.It undertook to completely overhaul United States–Australian trade relations inorder to eliminate the roughly six-to-one unfavorable balance of trade.15

The result of this initiative was a trade war between Australia and the United States. Australia devised a discriminatory “trade diversion program” againstthe United States, which refused to yield to pleas for a new bilateral agreement butinstead retaliated by blacklisting Australia. Eventually, as British-American rela-tions improved and World War II approached, the Australian government reverseditself under British pressure, and the trade war came to an end. Negotiations for atrade treaty between the United States and Australia were, however, unsuccessful.

War brought the two countries closer together. Before the Japanese attack on PearlHarbor in 1941, Australia desperately and unsuccessfully sought a security commitmentfrom the United States, but after the Pearl Harbor attack Australia and the United Statesbecame close allies. Many American troops appeared in Australia, and contacts betweenthe two countries multiplied at all levels. But relations were not entirely harmonious.Australia felt that it was not being consulted adequately by the United States on


many issues. In 1944, Australia and New Zealand called for a conference on theSouthwest Pacific, which was vigorously opposed by the United States. In discussionswith Australian representatives, Americans even compared this initiative to Soviettactics, arguing that regional arrangements should not be made until after global arrange-ments for security had been made. Clearly, United States officials feared that theirdelicate negotiations with the Soviet Union on Eastern Europe could be upset by actionsthat would seem to create “spheres of influence” in the South Pacific.16

Australia and the United States remained allies, and on good terms, after the war,although several contentious issues arose while Herbert B. Evatt was foreign ministerunder a Labour government (1945–49). Australia sought a formal alliance with theUnited States, but such an agreement—the ANZUS Treaty—was not signed until1951, during negotiations on the peace treaty with Japan and after the Korean Warhad begun. By then a conservative government was in power in Australia.

Since 1951, Australia has depended explicitly and formally on American protection.The two allies have cooperated closely on defense, particularly during the long conserva-tive rule in Australia between 1949 and 1972. Australia has been one of the most consis-tent supporters of American policy, and was one of the few allies of the United States tofurnish troops to fight in Vietnam. Its forces rely heavily on American equipment; mili-tary officers of the two armed forces maintain close contact; and political leaders haveconsulted frequently and intimately on a variety of common issues and trouble spots. Ourdiscussion of “conflict issues” between the United States and Australia should be seen inthe context of the remarkable amity and warmth of the relationship during the 1950s and1960s. Australian parliamentary debates during those years often reveal greater agree-ment, in fact, between the Conservative government of Australia and the United Statesgovernment, than between the Australian government and its Labour opposition.

Against this background we can consider the conditions of complex interde-pendence as they apply to the Australian-American relationship, taking up first therole of military force.

There has never been a serious risk of war between Australia and the United States:military force has not been used or threatened by one country against the other. Theprotective role of military force, however, has been extremely important in the relation-ship. Thus by a very indirect route, Great Britain’s desire for American military support inthe late 1930s helped to resolve the trade war to the United States’ advantage, and after1939 and particularly 1941, Australia’s need for American protection became acute.Since World War II, Australia has continued to rely on the United States. Moreover, thesecurity relationship is highly asymmetrical. America could fail to protect Australiawithout jeopardizing its own security, but Australia could not defend itself against apowerful attacker without American support.

On the second dimension of complex interdependence, channels of contactbetween societies, the Australian-American relationship also differs sharply fromthat between the United States and Canada. The fact that Australia lies almost10,000 miles from the United States makes an enormous difference. In the 1930s,Australia was three weeks’ sailing distance from the United States. A pioneering1940 air flight took over four days. Even today, the air time from Washington toCanberra is nineteen to twenty-one hours.


It is therefore not surprising that transnational links between the United Statesand Canada are much more extensive than between the United States and Australia,as Tables 7.1 and 7.4, taken together, show. In 1971, immigration to Australia from theUnited States was 28.7 percent of the comparable figure for Canada; and immigrationto the United States from Australia was only 4.5 percent of Canada-to-United Statesmigration. Total visits to and from Australia were only 0.3 percent as great as visits toand from Canada. Australian exports to the United States were only 5.4 percent of theCanadian figure; imports to Australia from the United States were only 9.5 percent ofCanadian imports from the United States. American direct investment in Australiawas similarly much smaller than American investment in Canada: less than 10 per-cent of Australian manufacturing industry was controlled in 1962 by Americaninvestors, as compared to 44 percent of Canada’s.17

TABLE 7.4 Selected Transnational Processes: United States–Australia

Immigration

Year U.S. to Australia Australia to U.S.

1920 1,709 2,066

1938 2,937 228

1953 (700)a 742

1962 1,082 1,878

1971 6,591 1,046Visits

Year U.S. to Australia Australia to U.S.

1920 Nd Nd

1938 Nd Nd

1953 Nd Nd

1962 nd nd

1971 85,079 78,777

Trade (£ millions)b

YearAustralian exports to U.S.

Australian imports to U.S.

1920 11 (7.4%) 24 (24.0%)

1938 3 (2.4%) 18 (16.0%)

1953 58 (6.8%) 85 (16.7%)

1962 109 (10.2%) 174 (19.7%)

1971 634 (12.1%) 1,032 (22.1%)

(continued)


TABLE 7.4 continued

Investment (U.S. $ millions)c

YearU.S. direct inAustralia

Annual flow, U.S. aspercentage of total

1920 53 nd

1938 89 nd

1953 324 27.6

1962 1,097 41.6

1971 nd 38.8

a This is an estimate, based on the figure for “country of last departure of permanent and long-term arrivals,” of 1,409.b Figures for 1971 are in U.S. dollars. Numbers in parentheses indicate the percentage oftotal Australian exports or imports accounted for by exports to or imports from the UnitedStates.c For investment, 1919 and 1936 are used rather than 1920 and 1938; the figures for 1953 and 1962are averages for 1952–54 and 1961–63 respectively, due to large annual fluctuations.

Note: Some discrepancies exist between sources with regard to these figures, but the order ofmagnitude is in every case the same.

Source: Immigration to Australia: Commonwealth Bureau of Census and Statistics, YearbookAustralia, various years.Immigration from Australia to the U.S.: Historical Statistics of the United States (Washington,D.C.: Government Printing Office, 1960) and Supplements (Washington, D.C.: U.S.Government Printing Office: 1965); and (for 1971) Yearbook Australia (Canberra: Australiangovernment, 1972).Visits: Commonwealth Bureau of Census and Statistics, Overseas Arrivals and Departures, 1971(Canberra).Trade: Yearbook Australia, various years; for 1971, International Monetary Fund/InternationalBank for Reconstruction and Development, Direction of Trade, 1970–74 (Washington, D.C.:IMF/BFD).Investments: Before 1971, Donald Brash, American Investment in Australian Industry(Cambridge, Mass., Harvard University Press, 1966); for 1971 (flows), Yearbook Australia, 1972and Commonwealth Treasury, Overseas Investment in Australia (Canberra, 1972).

Thus, even though Australia’s economy and population are smaller thanCanada’s, it is less dependent economically on the United States. Only about12 percent of total Australian exports in 1971 went to the United States, comparedto 66 percent of Canada’s. Imports from the United States constituted only about22 percent of total Australian imports (as opposed to 67.5 percent of Canadianimports).18 Although trade, direct investment, and migration all increased sharply


between 1920 and 1971, they remained much smaller for the Australian-Americanrelationship than for that between the United States and Canada.

Between the governments, there is what one official called “a tremendousnetwork” of contacts. Since 1950, Australian prime ministers have frequentlyvisited Washington; the ANZUS Council meets annually at the cabinet level, andcabinet officials have often met with each other on a variety of questions. Yet mostbusiness is still transacted in Washington, where Australia maintains a large andwell-staffed embassy. Although data on visits and telephone calls are not available asthey were for the United States and Canada, there seems no doubt that such datawould show many fewer points of direct contact between American and Australianofficials with similar tasks.

The agenda of Australian-American relations, like the Canadian-Americanagenda, is quite diverse. Yet, unlike the Canadian-American agenda, it has a clearand consistent hierarchy. By far the most attention has been paid, on both sides ofthe Pacific, to political and military issues relating to the alliance. Memoirs andsecondary works on Australian relations with the United States during the 1950sand 1960s overwhelmingly emphasized security questions, and the official record ofAustralian foreign policy, reflecting Australian parliamentary debates as well asgovernmental concerns, was preoccupied with them. So was reporting in the pressand journals of foreign affairs.19 Issues such as those of Malaya, Indonesia, and thenVietnam dominated the scene. The contrast with Canada is illustrated by Table 7.5,which indicates the amount of space devoted in the Public Papers of the President topolitico-military, as opposed to socioeconomic, activities involving Australia since1945. It therefore reflects what American presidents said publicly about Australia,and can be compared with Table 7.3, which carries out a similar task, with slightlydifferent techniques, for the Canadian-American relationship. Except for the periodin which Vietnam was a major issue, the salience of Australia to Americanpresidents was obviously very low.

TABLE 7.5 References to Australia, 1945–71

Politico-military Socio-economic or other

AdministrationNumber of pages Percentage

Number of pages Percentage

Truman(1945–53) 0.4 50 0.4 50

Eisenhower(1953–61) 2.8 97 0.1 3

Kennedy-Johnson(1961–69)

41.1 94 2.5 6

Nixon(1969–71) 2.3 92 0.2 8

Source: Public Papers of the President (Washington, D.C.: U.S. Government Printing Office,1945–71).


Australia’s often expressed concerns about military security during the 1950sand 1960s, and its sense of being a rather isolated outpost of Anglo-Saxoneconomic, political, and cultural institutions, living next door to actually or poten-tially hostile Asian neighbors, made it quite feasible to establish and maintain thishierarchy of issues with security affairs as the most important. After 1969, when oursystematic analysis ends, Australian policy changed markedly, under the Labourgovernment that came to power in late 1972 (but lost power in December 1975).20

Nevertheless, throughout the two decades after 1950, the traditional hierarchy ofissues remained intact.

As we shall see, conflicts took place on economic issues, but they were notallowed to disturb the alliance relationship on which the Australians believed theirsecurity depended. Furthermore, on economic and social issues Australia was simplynot as closely tied to, or dependent on, the United States as Canada was. Not onlywas there less direct investment, trade, and travel, but mass communications werequite different. American news magazines are sold in Australia, and a number ofAmerican television programs appear there; but the effect of American cultureis much less pervasive than in the English-speaking areas of Canada. It maybe an overstatement to argue that “Australia is still remote and separated from theday-to-day emotions, the drive and braking forces, the flow of life in America—almost as remote as she was when the only medium of communication was aclipper.”21 Yet the fact that this exaggerated comment could seriously be made indi-cates the tremendous difference between Australia’s relationship to the UnitedStates and Canada’s. Distance is not entirely an illusion.

It is evident that the basic conditions within which Australian-Americanrelations take place are very different from those for Canadian-American relations.Nonetheless, certain aspects of the regimes governing the postwar relationships arequite similar, particularly alliance consultation and avoidance of overt linkages inbargaining. Between 1950 and 1969, explicit linkages were virtually taboo.Although the Australian decision to sign the Japanese Peace Treaty was clearlyconnected to the United States decision to agree to the formation of ANZUS,diplomats tried to convince their audiences that the two events were not part of asingle bargain.22 As in the Canadian cases, linkages had not been uncommon beforeWorld War I. But in the Australian-American postwar relationship, politicizationdid not increase and the taboo against linkage was not threatened, because Australiadid not, in general, take an assertive stand toward the United States.

Because Australian-American relations approximate realist conditions better thanCanadian-American relations, we expect the overall structure model to explain theformer better than the latter. We shall show that this is the case: Australian-Americanrelations can be well explained in terms of overall structure, but the outcomes of post-war Canadian-American policy conflicts diverge considerably from expectations basedon such a theory. To determine why Canadian-American relations are different weshall examine the political bargaining process. We shall argue that, to a considerableextent, patterns of complex interdependence linking Canada and the United Statesaccount for the differences in patterns of outcomes between the Canadian-Americanand the Australian-American cases.

Identifying Issues and Outcomes: Canada–United States 155

IDENTIFYING ISSUES AND OUTCOMES:CANADA–UNITED STATES

By and large, traditional approaches have not been very helpful in explaining thepolitics of Canadian-American relationships. Canadian-American relations haveoften bored statesmen and scholars who see the world through realist lenses. As onescholar wrote in the mid-1960s, “study of Canadian-American relations tells onealmost nothing about the big problems facing the world.”23 Another scholar citedthe unguarded border between the two countries as an example of “indifference topower.”24 However, despite the minor role of military power in the relationship,there are frequent conflicts, and the two governments often exercise their power.But the power games and processes of political bargaining in conditions of complexinterdependence are not caught by traditional analyses.

Nor are the outcomes of conflict predicted well. A simple overall structureexplanation tells us that in a bilateral system in which one country had thirty-seventimes the military expenditures of its neighbor and was twelve times its economicsize, the larger country would prevail in more major disputes than the smaller.Moreover, when transnational actors from the hegemonic country penetrate thesmall country more than vice versa, the distribution of outcomes should favorthe large country even more. Indeed, some writers have coined the termCanadianization to refer to such situations.25 An issue structure explanation wouldtake account of the difficulty of making linkages among issues, but because of thepreponderance of American resources in most issues, a simple issue structure analy-sis would also predict that, in conflicts between the two governments, the UnitedStates would most often prevail in the distribution of gains. Alternatively, we canhypothesize that the political process of complex interdependence, and more partic-ularly the role of transnational and transgovernmental actors, lead to a more equalpattern of outcomes in intergovernmental bargaining than one would predict fromthe overall structure.

A more sophisticated structural argument would attribute the pattern ofoutcomes to the structure of the global rather than the bilateral system. Givenglobal bipolarity, the hegemonic leader stabilizes its alliance by allowing its juniorpartners to win minor conflicts. It is sometimes said, for example, that in the NorthAmerican relationship, “the Canadians win a good share of the games, but the ballpark and the rules of the game are American.” As we shall show later in this chapter,this aphorism includes an element of truth. But the Canadians agreed on the ballpark during the Cold War; they have won more games over time; and they havemade gradual changes in the postwar rules of the game. The cases that we list inTables 7.6– 7.9 were all important enough to capture the attention of the Americanpresident, and although the United States prevailed in one of the two cases withgreatest global strategic consequences—the 1961 conflict over Canada’s reluctanceto fit nuclear warheads on BOMARC missiles used in joint North American airdefense—the conflict over Canada’s delay in cooperating with the United Statesduring the Cuban missile crisis was a standoff (see Tables 7.8 and 7.9 for briefdescriptions of these conflicts). Of course, not all the cases were equally important


TABLE 7.6 Conflicts on Presidential Agenda, 1920–39: Canada–United States

Conflict

First governmentaction

First interstaterequest

Outcome closer to objectives of

Regulation of fisheries, 1918–37. Canada pressedU.S. for ratification of treaty on fisheries issues,particularly salmon. U.S. delayed on salmontreaty until 1930s when a threat developed fromJapanese salmon fishing.

Both Canada U.S.

Canadian restriction of pulpwood exports, 1920–23.U.S. successfully protested by threatening “far-reaching retaliation.” Canadian objective was toencourage processing in Canada.

Canada U.S. U.S.

St. Lawrence Seaway, 1918–41.a U.S. pressed forjoint navigation and hydroelectric development.Canada reluctant, but agreed to 1932 treatywhich then failed in U.S. Senate. U.S. pressedfor new agreement. Canada still reluctant butsigned in 1941.

U.S. U.S. Equal

Control of liquor smuggling, 1922–30. U.S. successfully pressed Canada to take internalmeasures that would make U.S. enforcement of prohibition laws easier and cheaper.

U.S. Canada U.S.

Chicago water diversion, 1923–28. Canadaprotested that Chicago’s diversion of GreatLakes’ water damaged Canadian harbors. U.S. refused to end the diversion.

U.S. U.S. U.S.

U.S. tariffs, 1928–38. Canada unsuccessfullysought to deter 1930 rise in U.S. tariffs. Canadaretaliated and sought alternative trade patterns.By 1933, Canada pressed for trade agreement.U.S. delayed, but signed agreements in 1935 and 1938. Canada gave somewhat greater concessions.

U.S. Canada U.S.

Trail Smelter Pollution, 1927–35. U.S.protested damage done to Washington farmersby fumes from British Columbia smelter andrequested referral to International JointCommittee (IJC). Under pressure from farmers,U.S. rejected IJC recommendations and successfully pressed Canada to set up a specialarbitral tribunal.

U.S. U.S. U.S.


TABLE 7.6 continued

Liquor Tax Bill, 1936.b Canada successfullyprotested a proposed punitive tax designed to forceCanadian distillers to come to an agreement withU.S. Treasury. State Department sympathized withCanada and Roosevelt backed State Department.

U.S. Canada Canada

Construction of Alaska Highway, 1930–38. U.S.proposed joint construction of a highwaythrough B.C. Canada feared “penetration” andsuccessfully resisted until 1942, when warchanged its objectives.

U.S. U.S. Canada

a Transnational organizations played a significant role in the political process.b Transgovernmental relations played a significant role in the political process.Source: Foreign Relations of the United States (Washington, D.C.: U.S. Government PrintingOffice, annually).

to Canada. Yet when one analyzes the ten conflicts selected by a panel of Canadianscholars as most important from the point of view of Canadian autonomy, one findsthat the United States did somewhat better than the full list indicates, but notdramatically so.26 (These cases are indicated in the following tables.)

Testing these alternative hypotheses about the outcome of the intergovernmen-tal bargaining process is more complicated than it first appears. In addition todescribing the pattern of outcomes, we also wanted to see whether the processes ofcomplex interdependence, particularly the roles of transnational and transgovern-mental actors, had changed. We thus decided to compare bargaining and outcomesin two decades before World War II with two decades after the war.

One of the first obstacles to clear analysis of Canadian-American interstatebargaining that we encountered was the well-selected anecdote. Each side had itsfavorite illustrations. Canadians tended to focus on a few specific incidents such asthe magazine tax. Canada was concerned about the dominance of the Canadianmagazine market by American magazines—particularly the Canadian editionsproduced by Time and Reader’s Digest. She viewed the issue as one of cultural intru-sion rather than of trade, and in 1956 passed tax legislation discriminating againstAmerican magazines. The magazines lobbied vigorously on both sides of the border,and the United States government protested the discriminatory treatment. Canadathen granted Time and Reader’s Digest exemptions from the legislation. Canadiansfrequently point to this case as typical of the postwar economic conflicts in whichtransnational acctors and the United States government team up to defeat theCanadian government.

Americans, on the other hand, tend to cite the auto pact as typical of therelationship. In the early 1960s, in an effort to increase production in Canada ratherthan in the United States, Canada introduced an export subsidy for automobile parts.


TABLE 7.7 Dyadic Conflicts, 1950s: Canada–United States

Conflict



Outcomecloser toobjectives of

St. Lawrence Seaway, 1945–58.a Canadathreatened to build alone if U.S. failed tospeed decision.

Canada Canada Equal

U.S. agricultural import quotas, 1953–mid-1960s. Canada repeatedly protested U.S.protection. U.S. made minor concessions butdid not meet basic request.

U.S. Canada U.S.

Gouzenko interview, 1953. U.S. requestedthat Canada arrange interview for Senatesubcommittee. Canada initially declined butagreed to a second request under certainconditions.

U.S. U.S. U.S.

Chicago water diversion, 1954–59.a Canadarepeatedly and successfully protested pendingU.S. legislation to permit Chicago to divertwater from Lake Michigan.

U.S. Canada Canada

U.S. quotas on lead and zinc imports, 1954–.Canada unsuccessfully protested U.S.restrictions.

U.S. Canada U.S.

Columbia River development, 1944–64.b, c

U.S. requested development of Columbia as asystem. Canada delayed until compensated fordownstream benefits, and until it reconciledinternal dispute with British Columbia.

U.S. U.S. Equal

Carling Brewery, 1956.a Canada protestedMaryland discrimination against Canadiancorporation. Eisenhower persuaded Marylandto change.

U.S. (state) Canada Canada

Magazine tax, 1956–65.b, c U.S. repeatedlyprotested discriminatory tax treatment ofCanadian editions of U.S. magazines. A 1956law was repealed; and in 1965, Time andReader’s Digest were exempted.

Canada U.S. U.S.

Security information guarantees, 1957.a

Canada protested Senate subcommittee disclosures that led to suicide of Canadianofficial. U.S. acceded to Canadian requestfor guarantees against future misuse of information.

U.S. Canada Canada


TABLE 7.7 continued

Exemption from oil import quotas, 1955–70.b, c

Canada successfully protested the illogic ofimport restrictions against her based onnational security grounds, and threatened topipe Western Canadian oil to Quebec and thus exclude Venezuelan oil.

U.S. Canada Canada

Extraterritorial control of corporations,1956–.b, c Canada requested U.S. to foregoextraterritorial restrictions on freedom of subsidiaries in Canada. U.S. refused to give upprinciple, but agreed to consultation procedurefor exemptions in specific cases.

U.S. Canada U.S.

a Transgovernmental relations played a significant role in the political process.b Transnational organizations played a significant role in the political process.c Case has major importance for Canadian autonomy.

Rather than simply retaliating by raising a countervailing tariff, the Americangovernment suggested an agreement to allow free trade in automobiles between thetwo countries. Canada agreed to the auto pact, but by bringing pressure to bear on thetransnational automobile companies, she was able to ensure that their next majorround of investment would take place in Canada, increasing production and provid-ing jobs on the Canadian rather than the American side of the border. ManyAmerican officials felt they had been cheated.*

It was almost as if blindfolded men trying to describe an elephant peeked fromunder their blindfolds in order to seize the part most useful to their differentpurposes. It is not unusual to hear Canadians claim that they do poorly in bilateralbargaining with the United States, or to hear American officials complain thatCanadians get away with too much. Such myths are resilient because they are polit-ically useful. But what is useful for statesmen can be obstructive for analysts.

A second problem as we saw earlier, was the impossibility of mapping the entireagenda of Canadian-American relations. Our solution to these research dilemmas wasto focus on significant interstate conflicts that reached the United States’ president.This solution has the disadvantage of focusing on only part of the total interstateagenda, and statistically it produced a small number of cases. Nonetheless, it hasseveral redeeming advantages. First, and most important, the presidential conflict

*Carl Beigie, “The Automotive Agreement of 1965: A Case Study in Canadian-American EconomicAffairs,” in Richard A. Preston (ed.), The Influence of the United States on Canadian Development (Durham, N.C.:Duke University Press, 1972), p. 118. A Canadian minister went over the head of GM Canada to negotiatedirectly with General Motors officials in New York. It is said that without the separate side agreements Canadawould not have signed the intergovernmental agreement (from interviews in Ottawa). See also testimony inU.S. Congress, Senate, Committee on Finance, United States-Canadian Automobile Agreement, Hearings Beforethe Committee on Finance on H.R. 9042, 89th Cong., 1st sess., September 1965, pp. 153–56.


TABLE 7.8 Dyadic Conflicts, 1960s: Canada–United States

Conflict




BOMARC procurement, 1959–60.a

Diefenbaker asked Eisenhower to continuedevelopment of BOMARC missile threatenedby Defense Department and congressional cutbacks. Funds were restored.

U.S. Canada Canada

Nuclear arming of Canadian weapons,1961–63.b, c U.S. requested that Canada armher weapons systems in NORAD and NATO.Diefenbaker’s government split and fell.Pearson government armed the systems.

Canada U.S. U.S.

U.S. restriction of lumber imports, 1961–64.a

Canada requested relaxation of administrativerestrictions and later veto of highly protectivecongressional bill. Johnson vetoed bill.

U.S. Canada Canada

Seafarer’s International Union, 1962–64.a, c

Canada requested that U.S. government restrainAFL-CIO support of the Seafarers’ InternationalUnion and disruptive boycotts of Canadian ship-ping. Presidential efforts to influence AFL-CIOwere insufficient and the disruption ended onlywhen Canadian government trustees came toterms with SIU. U.S. government objective wasto be helpful without antagonizing the AFL-CIO.

Canada Canada U.S.

Renegotiation of civil air routes, 1962–65.Canada requested renegotiation to permitdeeper penetration of U.S. by Canadian airlines. Agreement was reached on basis ofGalbraith plan treating continent as a unit.

Canada Canada Equal

Extended fishing zones, 1963–. Canada unilater-ally declared extended fishing zones and straightbaselines. Although Canada made some provi-sion for historic fishing rights, U.S. protested butwas unable to deter the Canadian extension.

Canada U.S. Canada

Interest equalization tax, 1963.c Canadarequested exemption from tax on grounds thatan integrated capital market existed. U.S.granted exemption for new issues on conditionthat Canada not increase its reserves throughborrowing in U.S. U.S. objectives were toimprove its balance of payments position.

U.S. Canada Equal


TABLE 7.8 continued

U.S. balance of payments guidelines, 1965–68.a, c

Canada requested exemptions from U.S. guidelines, voluntary in 1965 and mandatory in 1968, encouraging American corporations to restrict outflows and increase repatriation ofcapital. Exemptions were granted in return forrestrictions on the pass-through of U.S. fundsand on the level and form of Canadian reserves.

U.S. Canada Equal

Auto pact, 1962–73.a, c U.S. threatened retalia-tion over Canadian export subsidy designed toachieve Canadian objective of increased pro-duction in Canada. Pact integrating automo-bile trade led to joint gain, but Canadaachieved more of the gain in first decade, caus-ing U.S. complaints.

Canada U.S. Canada

Arctic pollution zone, 1969.a, c U.S. protestedand asked Canada to defer extension of juris-diction to 100 miles following 1969 voyage oftanker Manhattan. Canada refused.

Canada U.S. Canada

a Transnational organizations played a significant role in the political process.b Transgovernmental organizations played a significant role in the political process.c Case has major importance for Canadian autonomy.

agenda offers the best prospect of closing a universe of like cases. Conflictual behaviorat the top tends to be better reported by observers and better remembered by partici-pants. Although complete discovery is unlikely, it is probably possible to approach areasonably complete universe of significant cases. Conflicts that reach presidentialattention also tend to be more important than others, so there is an implicit weightingof cases. It is true that summit meetings sometimes produce “agenda-filler” items, butthis happens more often with cooperative than with conflictual issues.* Moreover,unlike total bureaucratic resources, presidential attention is a physically restricted andvery scarce resource. Because we are interested in how the transnational and transgov-ernmental aspects of complex interdependence have affected interstate relations overtime, it is useful to see their relationship to a fixed resource. Also, by focusing on highpolitics, the bias we introduce is against our complex interdependence hypothesis thattransnational and transgovernmental relations are important. Finally, because the

*One U.S. official, for example, described how he and a Canadian counterpart took the initiative inworking out a new approach to a problem of Great Lakes pollution. By the hazards of timing of a summitmeeting and the need for “friendly” items for the communique, his venture reached presidential attention. It ishard to discover agendas that need conflictual issues to be deliberately added. See also Roger Swanson,Canadian-American Summit Diplomacy, 1923–1973 (Ottawa: Carleton, 1975).


TABLE 7.9 Conflicts Involving Relations with Third Countries, 1950–69:Canada–United States

Conflict

First interstate request


Conduct of Korean War, 1950–53.Canada repeatedly requested U.S. restraint, but without great effect.

Canada U.S.

Defense of Quemoy and Matsu, 1954–55.U.S. requested Canadian support, but Canada disassociated itself from defense of the islands.

U.S. Canada

Recognition of Chinese People’s Republic, 1954–70.Canada raised the possibility of recognition three times in 1950s, but was deterred, in part, by U.S. inflexibility.

Canada U.S.

Wheat sales to third countries, 1954–64.a

Canada repeatedly requested that U.S. restrict dumping of surpluswheat. Agreement was reached on consultation and avoidance ofdumping in Canadian commercial markets.

Canada Canada

Canada and Organization of American States, 1961–63.U.S. requested that Canada join as part of strengthening LatinAmerica against Cuba and communism. Canada did not join.

U.S. Canada

British entry into EEC, 1961–63.U.S. requested Canadian support for British entry to strengthen Atlantic world. Canada did not support at that stage.

U.S. Canada

Aid to less developed countries, 1961–63.U.S. requested increased Canadian assistance in strengtheningpoor countries. Canadian aid decreased.

U.S. Canada

Disarmament and nuclear test ban, 1962.Canada opposed U.S. atmospheric tests and requested quickerU.S. agreement for a test ban. Little effect on U.S. policy.

Canada U.S.

Cuban Missile Crisis, 1962.a

U.S. informed Canada of its actions and expected diplomatic support and military mobilization. Diefenbaker delayed full support, but military mobilization went faster than he authorized.

U.S. Equal

Conduct of Vietnam War, 1964–73.b

U.S. requested Canadian aid to South Vietnam. Canadarequested U.S. restraint in war. Little effect on policy.

U.S. Equal

a Transgovernmental relations played a significant role in the political process.b We have scored this case differently than Nye did in International Organization, Autumn1974, because we have discovered additional information about it.Note: Dates refer to presidential attention to the Canadian-American dimensions of the issue.


president has the broadest jurisdiction over issues of any governmental actor, it is atthe presidential level that we are most likely to find the linkages among issues that arecommonly held not to exist in Canadian-American interactions. Despite the statisti-cal disadvantages, we decided to use a procedure yielding a small number of caseswhose importance and validity can be justified in terms of our theoretical concerns.

One of the difficulties in identifying cases concerns the boundaries andoutcomes of conflicts. By a significant interstate conflict we mean a situation inwhich one government’s request to another is not easily fulfilled, because objectivesare incompatible or the means are too costly. Conflict in this sense is not necessarilydramatic. Resolution of a conflict need not favor one country over another; within acontinuing cooperative relationship, the resolution may benefit both countries.*There may be large areas of mutual compatibility of government objectives; and themajor area of incompatibility need not arise out of the preferences or actions of thechief executives. What is necessary for a significant interstate conflict to exist,however, is an interstate request that cannot be easily or costlessly complied with bythe recipient government. The request need not take a particular diplomatic form,but there must be communication of a mutually understood preference for (oragainst) a particular course of action.

A conflict begins when the first intergovernmental request is made, and endswhen there are no further requests or when presidential attention is no longer devotedto it. A conflict can involve one or many requests. We shall treat a set of requests as asingle conflict if the government objectives stated in each are largely the same. Thusthe magazine tax case, for example, recurred during three Canadian administrations,but the nature of the American requests (nondiscriminatory treatment of Time andReader’s Digest) remained essentially the same. On the other hand, Canadian exportsof oil to the United States became a different case in the 1970s from what it was in the1960s because the governments’ objectives (and requests) changed from Americanlimitation to American encouragement of imports from Canada.

Scoring the outcomes of conflicts also poses certain problems. In Table 7.6we examine the range of incompatibility of initial objectives and ask whether thetcome was closer to the objectives of Canada or the United States at the time of thefirst request, or was roughly equidistant between them. This tabulation does not tellus how harmonious or creative the resolution was: in some cases, both sides maygain from the result. Nor does it imply that the losing side made all the concessions.All it indicates is which country was more favored by the outcome.

When a conflict was not solved by the end of the period under study, or whenthere was a major delay during which either government’s objectives changed, thedelaying country is regarded as having achieved its objectives. For example,although the United States eventually changed its treatment of the Chinese

*There are often Pareto optimal solutions to conflict that make both countries better off. (This is the jointgain component of the solution.) But the exact location on the curve of Pareto optimality is indeterminate. (Thisis the question of distribution of gain on which we focus in this section.) In some cases, the joint gain may be insome ways more significant than the distribution of gain, but the latter tests hypotheses about interstate bargainingin a situation of asymmetrical penetration by transnational actors.


People’s Republic, it did not do so until some fifteen years after St. Laurent firstraised the question with Eisenhower.

Finally, our conclusions do not depend on a judgment about whether the deci-sion-makers held the “right” objectives. One Canadian official told one of us thatcertain cases were not really conflicts because the American officials did not cor-rectly perceive their own interests. Likewise, Canada’s policy on the 1965 auto pactcould be criticized on the grounds that it undermined Canadian autonomy. Yet inboth cases, whether conflicts “should” have existed or not, they did. Even twoobservers with different perspectives on proper policy should be able to say whichgovernment got more of the objectives it then (perhaps unwisely) held.

Quite obviously, these procedures for identifying and scoring a set of conflictsaddress only part of the Canadian-American relationship. For example, it is impor-tant to realize that some social and economic groups often benefit more than othersfrom intergovernmental agreements, and this socio-structural aspect is not caughtby our analysis of intergovernmental bargaining. Canada won great gains from the1965 auto pact; but one can also view the auto pact as a tacit coalition between theCanadian government, Canadian auto workers, and American auto companies onone side, and Canadian consumers and some American auto workers on the other.Moreover, when national legislative remedies in the United States failed, the autoworkers’ union took a direct transnational route to discourage the export of jobs toCanada by bargaining with the companies for wage parity across the border.Canadian auto workers profited, but it is not clear that other Canadian workers did.And Canadian nationalists regretted the loss of autonomy for Canadian subsidiariesof the multinational auto firms. Similarly, although the bargaining position of theCanadian government may have been strengthened more often than weakened inthe cases that we analyzed, losses are often more costly for the penetrated nation.

It is also worth noting that the cases below focus on conflicts at the pinnacle of theintergovernmental process rather than throughout the government. During the prewarperiod for which the diplomatic documents are available, however, the pattern of out-comes of seventeen conflicts that did not reach the presidential level (nine, UnitedStates; six, equal; two, Canada) was similar to the pattern at the presidential level.* Forthe postwar period it is impossible to make careful comparisons, but impressionistic evi-dence does not suggest a great difference in patterns of outcomes at different levels.

Another problem is that the approach divides a continuous process into discreteparts and scores the relationship as a sum of parts rather than as a whole. Althoughthis objection has a certain validity, it is interesting to note that many diplomats andpoliticians themselves often have a rough scoring system in their heads.** As one

*The seventeen conflicts were: 1920’s—Great Lakes naval limitations, Missisquoi Bay fishing, RoseauRiver drainage, Canadian peach embargo, U.S. dairy embargo, St. Mary and Milk River diversion, U.S.sinking of I’m Alone liquor ship, border crossing privileges, Passamaquoddy Bay power; 1930’s—Canadiandiscrimination against U.S. tugboats, U.S. seizure of Canadian ship, St. Clair River dredging, Canadian seizureof four U.S. fishing boats, consular visits to criminals, Great Lakes cargo, income tax agreements, arms for theSpanish Civil War. We are indebted to Alison Young for research assistance on these cases.

**About thirty present and former officials were asked to comment and correct the description andscoring of conflicts in Tables 7.2, 7.3, and 7.4. Only one (Canadian) objected to the procedure of trying toscore discrete conflicts (on the grounds that it misrepresented a continuous process).


official put it, “there is a general sense of who has been making more concessionsover the past few years.” This vague awareness of who has overdrawn his credit inthe political bank balances is a subtle but important background link among issues.*If issues are closely linked, then an unfavorable outcome for a government on oneissue may simply be the price it is paying for a favorable outcome on another.Generally, however, the linkages are not this close.

Finally, generalizations about the entire Canadian-American relationship madeon the basis of high-level conflicts do not include conflicts that failed to arisebecause of the anticipated reaction or because societal or transgovernmental con-tacts led to a statement of government objectives that diminished the conflict. Forexample, some Canadian subsidiaries of American firms probably shunned Chineseorders so as not to run afoul of extraterritorial restrictions on their trade.27 Persistentpatterns of transnational ties in North America are a socio-structural factor that isbound to affect the way the Canadian government defines its preferences in the firstplace. But in Tables 7.6–7.9, it appears that close transgovernmental contact amongfairly autonomous agencies may have led to avoidance of interstate conflict byunderstating Canadian objectives in two cases: the Columbia River (Table 7.7) andnuclear weapons (Table 7.8). In the latter, a transgovernmental military coalitionpressed Diefenbaker into an early acceptance of nuclear weapons, which he latercame to regret.** Similarly, Canadian dependence on transgovernmental communi-cation of relevant information can limit Canadian options.28

On the other hand, as a glance at Tables 7.6–7.9 quickly shows, it is not truethat Canada never raised big issues. Indeed, as we shall see later, Canada raised sev-eral difficult issues that Australia kept dormant (but not vice versa). And one mustbeware of spurious causation in considering why certain conflicts were muted. Forexample, Canada’s delay in recognizing the Chinese People’s Republic was partly indeference to the United States, but also because of Canadian domestic politics.29 Inother words, one must be careful to read neither too much nor too little into thecases. With these caveats in mind, we summarize nine prewar cases in Table 7.6 andthe thirty-one postwar cases in Tables 7.7, 7.8, and 7.9 before analyzing them interms of agenda formation and political process.***

*Different bureaucracies in the same country may keep different scores. U.S. Treasury officialscomplained more frequently in the early 1970s that Canadians always came out ahead. As one StateDepartment official observed, “In the 1960’s the relations among financial officials were so close that we wereoften shut out of policy. Now their relations are so poor that they complicate policy.” (From interview inWashington, D.C., December 1973.)

**The pronuclear group in the Progressive Conservative party was reinforced by official and unofficialvisits and communications with NATO and NORAD officials (from interviews in Washington, D.C.).

***The procedure for constructing Tables 7.7, 7.8, and 7.9 was as follows: A long list of interactions wasconstructed from all references to Canada in Public Papers of the Presidents of the United States, presidentialreferences in the Department of State Bulletin, and the Council of Foreign Relations clippings files (primarilyNew York Times, New York Herald Tribune, Financial Post [Toronto], Globe and Mail [Toronto]). Further referenceswere added and interactions not involving significant conflict were removed from the list on the basis of secondaryaccounts. Particularly useful for 1950 to 1963 were the Canadian Institute of International Affairs volumes onCanada in World Affairs; and for the 1960s, the Canadian Annual Review. The list was then further refined throughinterviews with thirty current and former officials and observers. Certain issues (such as DEW Line, ABM,bunkering facilities, Laos) have been excluded as not involving sufficient incompatibility of objectives. Others(such as Cuban trade, Mercantile Bank) have been excluded as lacking direct presidential involvement.


Later we shall analyze these conflicts, comparing them with Australian-Americanconflicts. At this point, summarizing our findings about the pattern of outcomes may beuseful. First, the pattern is much more symmetrical than simple structural explanationswould predict. Second, Table 7.10 shows a striking change over time. The outcomeswere closer to the Canadian government’s objectives in only a quarter of the prewarcases but in nearly half the postwar cases. Outcomes were closer to Americangovernment objectives in two-thirds of the prewar cases and nearly half the cases in the1950s, but in only a quarter of the cases in the 1960s. Canada did better in the postwarthan in the prewar period, and better in the 1960s than in the 1950s.

IDENTIFYING ISSUES AND OUTCOMES:AUSTRALIA–UNITED STATES

The same procedure was used to generate lists of Australian-American conflictissues. Tables 7.11– 7.13 are comparable to Tables 7.6–7.9 on Canadian-Americanrelations, since the criteria for including and scoring issues were identical. Likewisesimilar caveats apply. For the Australian-American case, nonconflicts seems to bemore important than in the Canadian case. Australia seems to have refrained fromraising certain issues at the presidential level for fear of disrupting the generalpattern of relations with the United States. Thus, our data may even understate thedegree of American dominance in the relationship.*

TABLE 7.10 Patterns of Outcomes in High-LevelConflict: Canada–United States

Favored by Outcome

Dates U.S. Canada Equal Total

1920–39 6 2 1 9

1950s 7 6 2 15

1960s 3 8 5 16

Total 16 16 8 40

Note: Conflicts that overlapped decades are listed accordingto when they began.

*It is impossible to get a systematic survey of nonpresidential-level conflicts, since many such issues arelikely never to appear in documents, reports, or memoirs. (This may be true also for some presidential issues,particularly on highly classified problems, but presumably it will not happen so frequently.) An analysis of fiveimportant (so far as the record shows) nonpresidential conflicts between the U.S. and Australia in the years1950–69 indicates that the outcome was closer to Australia’s position in one (wool auctions, 1950–51) andcloser to that of the United States in four (U.S. wool tariff, 1960s; U.S. restrictions on dairy products, 1950s;interest equalization tax, 1963; and U.S.–Australian air routes, 1969).This analysis suggests that Australia mayhave done at least as poorly in conflicts with the United States on nonpresidential as on presidential issues, butit should not be taken as either comprehensive or as definitive.

Identifying Issues and Outcomes: Australia–United States 167

TABLE 7.11 Presidential Agenda, 1920–39: United States–Australia

Conflict




Wheat agreement, 1933.Australia resisted acreage quota at Londonconference. U.S. threatened to impose quotas only in the midwest, letting western wheat compete with Australia in the Pacific. Australiathen agreed to an arrangement regarded by U.S. as a triumph.

Both U.S. U.S.

Bilateral trade agreement, 1934–43.Australia pressed unsuccessfully for a bilateraltrade agreement. Issue was superseded after 1943by multilateral GATT negotiations.

Austr. Austr. U.S.

Matson Line controversy, 1935–38.a

Matson Line competition with British ships ledAustralia to consider preventing it from participating in Tasman trade. U.S. pressure onAustralia prevented action.

Austr. Austr. U.S.

Trade diversion, 1936–38.In an effort to balance U.S.-Australian trade,Australia imposed discriminatory barriers onU.S. exports to Australia. U.S. retaliated byblacklisting Australian goods. Australia withdrew discriminatory measures.

Austr. U.S. U.S.

a Transnational organizations played a significant role in the political process.Source: Foreign Relations of the United States (Washington, D.C.: U.S. Government PrintingOffice, annually).

Australia had a conservative government between 1950 and 1969. Relations withthe United States were more acrimonious both under the previous Labourgovernment, which served until 1949, and under the Labour government that cameinto power in 1972. The Labour opposition during the 1960s, in particular, was highlycritical of Australian government policy toward the United States. A Labour govern-ment would almost certainly have been less acquiescent to American requests to sendtroops to Vietnam. It would almost certainly have made an issue of the terms on whichthe United States acquired the use of the Northwest Cape Communications Station(which were renegotiated in 1974 after Labour’s return to power); and it might wellhave raised more questions about American direct investment in Australia. But rais-ing these issues would not have changed the basic asymmetrical structure of the rela-tionship; and as long as a Labour government felt threatened from Asia it would alsohave felt the need to maintain strong relations with the United States. And in any


TABLE 7.12 Dyadic Conflicts, 1950–69: United States–Australia

Conflict


First interstateaction


Wool tariff.Throughout the 1950s and 1960s Australiaprotested U.S. wool tariff as set in 1947. U.S.refused to change it, citing congressional pressures.Although some negotiating took place in theKennedy Round (1967), Australia would notaccept U.S. demands for quid pro quo on tobacco.

U.S. Austr. U.S.

Lead and zinc quotas, 1958–65.Australia protested U.S. quotas in 1958. Eisenhowerindicated willingness to discuss them, but no signifi-cant U.S. action followed. Removal of quota restric-tions in 1965 was not a result of Australian pressure.

U.S. Austr. U.S.

Meat restrictions, 1964–.U.S. urged Australia to agree to voluntaryrestraints, which was done in early 1964. Senatepassed restrictive quota bill in July; Menzieswrote to Johnson threatening retaliation, and acompromise was devised.

U.S. U.S.,thenAustr.

Equal

U.S. balance of payments guidelines, 1965.a

Australia requested an exemption, but U.S. refused.It took unilateral measures; but the issue diedbecause of Australian ability to borrow in Europeand strengthening of Australian reserve position.Capital inflow was not retarded significantly.

U.S. Austr. U.S.

F-111 bomber, 1963–.Gorton expressed concern to Nixon in 1969, onprice and specifications. Australia demanded rene-gotiation in 1970 and got a few minor concessions.Australia purchased 24 F-111’s for $200 millionmore than original estimate (160% cost overrun)with delivery taking place in 1973 rather than 1968.

U.S. Austr. U.S.

Sugar quota, 1960s.b

Australian leaders paid considerable attention tothis issue in the early 1960s; Holt was briefed toraise it with Johnson in 1966 or 1967. Quotas forAustralia rose rapidly.

U.S. Austr. Equal

a Transnational organizations played a significant role in the political process.b Documentary evidence that this case reached the presidential level is lacking, but interviewsindicate that it probably did.Source: Materials cited in footnote 19 as well as interviews conducted in Washington, August1974, with Australian and U.S. officials and former officials.

Identifying Issues and Outcomes: Australia–United States 169

TABLE 7.13 Conflicts Involving Relations with Third Countries, 1950–69: UnitedStates–Australia

Conflict



Japanese peace treaty, 1950–51.Australia resisted signing a Japanese peace treaty, but agreed eventually in conjunction with signing of ANZUS agreement.

U.S. U.S.

ANZUS, 1946–51.Australia pressed for a security agreement with the U.S., which was formally achieved in conjunction with Japanese peace treaty in 1951.

Austr. Austr.

West New Guinea, 1950–62.Australia repeatedly expressed concern about West New Guinea and adopted a position hostile to Indonesia’s. After discussing the issue with Kennedy in 1961, Menzies moderated Australian policies. Reports indicated a clash between U.S. and Australia on the issue.

Austr. U.S.

SEATO, 1954.U.S. insisted that its commitment be limited to “communist” aggression, although provision was not included in the treaty but appended as a reservation. The U.S. strongly opposed Australia’s adding a similar reservation; Australia did not do so.

U.S. U.S.

Malaya, 1955.Australia tried to get explicit U.S. commitments to Malayaunder SEATO but failed; only a general statement resulted.

Austr. U.S.

Wheat sales to third countries, 1954–59.a

Australia repeatedly requested that U.S. restrict concessional sales of surplus wheat. Agreement was reached on consultation and avoidance of damage to Australian commercial markets.

Austr. Austr.

UK application to EEC, 1962.Australia was concerned that the UK entry to the EEC would result in phasing out of Commonwealth preferences, and asked U.S. support to maintain them. U.S. refused to oppose UK entry or try to make it contingent on Commonwealth preferences.

Austr U.S

Australian troops for Vietnam, 1967.In July, Clifford and Taylor visited Australia, requesting more troops. Holt resisted, but in October agreed to send more forces. (Australian forces were sent originallyin 1965, but resistance was not evident until 1967.)

U.S. U.S.

(continued)


case, Australia simply did not have the levers of influence over the United States thatCanada possessed. A Labour government—given the politics of Australia in the1960s—could have changed the tone of relations with the United States, but not theessence. Indeed, on some issues, such as meat and sugar, a Labour government mighthave received less consideration from the United States.

Table 7.14 summarizes patterns of outcomes in Australian-American conflicts.In contrast to what we found for the Canadian-American conflicts in Table 7.10,the United States continues to dominate throughout the period. In this relation-ship, as structural models under realist conditions would predict, the strongerpartner predominates.

TABLE 7.13 continued

Conflict



International wheat agreement, 1968–69.U.S. and Canada argued that Australia was usingimproper freight rate arrangements to undercut prices inEurope. Australia agreed to reduce “the intensity of itscompetitive selling,” apparently under threat of U.S. andCanadian retaliation.

U.S. U.S.

Nonproliferation treaty, 1969–73.a

U.S. requested all allies to sign and ratify the NPT, butAustralia had reservations. U.S. did not exert pressure onAustralia, which only signed in 1970 and did not ratifyuntil 1973, after Labour government had taken office.

U.S. Austr.

a Transgovernmental relations were significant.Source: Materials cited in footnote 19 as well as interviews conducted in Washington, August1974, with Australian and U.S. officials and former officials.

TABLE 7.14 of Outcomes in High-LevelConflict: Australia–United States

Favored by Outcome

Dates U.S. Australia Equal Total

1920–39 4 0 0 4

1950s 6 2 0 8

1960s 5 1 2 8

Total 15 3 2 20

Note: Conflicts that overlapped decades are listed accord-ing to when they began.

Comparing the Politics of Agenda Formation 171

COMPARING THE POLITICS OF AGENDA FORMATION

Agenda formation is important to the political process. Allocating the scarceresource of presidential attention toward certain issues to the exclusion of others cansometimes be as significant as influence in decision-making.30 The number ofconflicts reaching the president approximately quadrupled between the prewar andpostwar periods for both Canadian and Australian relations with the United States.Further, whereas the interwar agendas consisted almost entirely of bilateralproblems, a third of the postwar Canadian-American agenda, and 60 percent of thepostwar Australian-American agenda, involved relationships with third countries.This postwar appearance of third country conflicts reflects responses to a globalstructural factor: postwar involvement and alliance ties in contrast with prewarisolationism for all three countries.31

Yet the two postwar agendas were quite different. In particular, the CanadianAmerican agenda included more than three times as many bilateral issues. This ispartly accounted for by their physical proximity and the consequent prominence ofjurisdictional conflicts in their relationship. Six of the nine conflicts in the prewarCanadian-American relationship arose from proximity (St. Lawrence Seaway, trailsmelter, fisheries, Chicago water diversion, liquor smuggling, and Alaska highway),but this was true of only three of the thirty-one postwar cases (St. Lawrence Seaway,Columbia River, and Chicago water diversion). Dividing each relationship into aprewar and postwar era, Table 7.15 compares interstate agendas, categorizing issuesaccording to the types of objectives pursued by governments.

A Canadian analyst has hypothesized that in an asymmetrical relationship, thesmaller state sets the agenda.* At least in the postwar period, the smaller statesmade most of the interstate requests; in each case over 50 percent more than thenumber of requests made by the United States. In this sense, it was the beaver’sagenda. If, however, we ask in which country the first governmental action occurredthat led to dyadic interstate conflicts, it was somewhat more clearly the elephant’sagenda. The United States originated more conflicts than its partner in bothrelationships. If we disaggregate the Canadian-American figures, however, we find adifferent pattern in the 1960s. Canada took the first governmental action in six often cases, partly because presidential attention was diverted to problems elsewhere,as in Vietnam, but also because of rising Canadian nationalism and dissatisfactionwith the status quo.

When we analyzed these findings by issue area, we found that the smaller countriesmade the first request most frequently on socioeconomic issues. These were preciselythe issues on which the United States most often took the first governmental action.Thus the typical conflict pattern on these issues was for the United States (frequently

*James Eayrs, “Sharing a Continent: The Hard Issues,” in John S. Dickey (ed.), The United States andCanada (Englewood Cliffs, N.J.: Prentice-Hall, 1964), p. 60. Determining the first interstate request is oftendifficult for the recent period when the documents are not available; so we have used the source of the basicrequest underlying the conflict. This is sometimes not the same as the first request. For example, in cases wherethe U.S. requested voluntary export controls but Canada requested better access to the American market, it isthe U.S. action that generates the issue but the basic request is Canadian.


the Congress) to take a unilateral, often “domestic” action to which the smallerpartners tended to respond by demanding redress through diplomatic channels. Onother issues, patterns of requests and governmental action were more symmetrical. Onthese, the United States made the first request fourteen of twenty-nine times, and tookthe first governmental action on six of eleven occasions.

Table 7.16 examines another perspective on interstate agendas, by tabulating thenumber of times that transnational organizations were involved in issues, for the foursets of conflicts under investigation. Three of these agendas look remarkably alike,with transnational organizations playing minor roles in generating conflicts betweenthe governments. It is the Canadian-American postwar agenda that is dramaticallydifferent, with ten cases involving transnational organizations. (If we looked at socioe-conomic issues alone the difference would be even more pronounced, with almost halfthe Canadian-American postwar issues involving transnational organizations.) Thusin the postwar Canadian-American relationship—the one that came closest to ourmodel of complex interdependence—transnational organizations are clearly moreimportant in high-level conflicts than they were in the other three relationships.

Transnational organizations played diverse roles in the political processes ofagenda formation, including lobbyist, target, catalyst, instrument, and beneficiary ofgovernment action. In three cases (civil air routes, oil import quota, lumber importquota) the transnational organizations were minor actors. In only one case did thetransnational organization (Boeing) deliberately initiate political activity. When itacted as a target, the issue was politicized as a result of domestic groups appealing totheir home government for protection against the activities of the transnationalorganization. The “catalyst” case was politicized because the Canadian publicperceived the voyage of the tanker Manhattan as a threat to Canadian sovereignty.32

In two of the “instruments” cases the United States government manipulated

TABLE 7.15 Interstate Agendas, by Issue Area

Conflict setPolitico-military a

Diplo-matic b

Socio-economic

Joint resourceproblems

Competing sovereignty claims

Prewar

U.S.–Australia 1920–39 0 0 4 0 0

U.S.–Canada 1920–39 0 0 3 6 0

Postwar

U.S.–Australia 1950–69 6 3 7 0 0

U.S.–Canada 1950–69 7 6 11 3 4

Total 13 9 25 9 4

a Force or weaponry involved.b Military force not involved.

Accounting for Differences in Outcomes 173

corporate subsidiaries to achieve policy goals, but this manipulation in turnstimulated nationalism in Canada. For example, Diefenbaker politicized theextraterritorial controls case in his election campaign in 1957.* In 1965, the UnitedStates balance of payments guidelines were politicized in Canada through transgov-ernmental conflict when Eric Kierans, a provincial minister, prodded the Ottawagovernment out of a complacent acceptance by sending (and publicizing) a letter ofprotest to the United States Department of Commerce.

Canadians reacted most strongly when multinational firms played importantpolitical roles—as targets of government action, catalysts for it, or instruments ofUnited States government policy. More traditional issues of transnational flows,even when multinational firms were involved, rarely stirred such passions.

In summary , one of the major sources of the difference between the prewar andpostwar agendas in both relationships was the postwar position of the United Statesas the leader of a network of alliances. But in the postwar Canadian-Americanrelationship, transnational organizations affected the political processes of agendaformation in a third of the cases. Since the relationship approximates our ideal typeof complex interdependence, this is not surprising.

ACCOUNTING FOR DIFFERENCES IN OUTCOMES

When we compare the outcomes of all high-level conflicts (Tables 7.10 and 7.14), thepostwar Canadian-American relationship again stands out. In each of the other threerelationships, the United States dominated as a simple overall structure model wouldpredict, securing outcomes closer to its objectives at least twice as often as Canada orAustralia. In the postwar Canadian-American relationship, however, Canada has aslight edge, which represents its greater success in dealing with the United States in the1960s. The improvement in Australia’s position was much less marked. The postwarCanadian case is an apparent anomaly for a simple overall structure explanation.

TABLE 7.16 Involvement of Transnational Organizations in Issues

ConflictsTransnational organizations

involvedTransnational organizations

not involved

U.S.–Australia 1920–39 1 3

U.S.–Canada 1920–39 1 8

U.S.–Australia 1950–69 1 15

U.S.–Canada 1950–69 10 21

*In 1957, Diefenbaker charged that the Liberals would make Canada “a virtual 49th economic state.”James Eayrs, Canada in World Affairs, 1955–57 (Toronto: Oxford University Press, 1959), p. 125. In the 1958election, an alleged refusal by Ford of Canada to sell trucks to China was widely publicized. Trevor Lloyd,Canada in World Affairs, 1957–59 (Toronto: Oxford University Press, 1968), p. 93.


Both the Australian-American and Canadian-American postwar relationshipsinvolved alliance regimes with norms against overt linkage, yet the Canadians wereable to reap more gains than were the Australians. Why was Canada more success-ful? The two major explanations lie in the differences of symmetry in the patterns ofinterdependence in the two relationships and in the different conditions (realismversus complex interdependence) that affected the bargaining process. In somecases, Canada was able to play on sensitivity interdependence (which was possibleonly while the regime held), whereas in other cases Canadian success was based onthe symmetry of vulnerability dependence. Moreover, the conditions of complexinterdependence contributed both directly and indirectly to Canadian success. Aswe saw above, agenda-setting by transnational actors tended to stimulate Canadiannationalism, which increased the intensity of the Canadian bargaining positions. Inat least six cases, moreover, Canadian success depended largely on the directinvolvement of transnational and transgovernmental actors in the bargainingprocess. Table 7.17 summarizes the cases, but we shall now look in greater detail ateach of the two major explanations.

First, on several issues, the asymmetry of vulnerability between Canada and theUnited States is much less than between Australia and the United States. The asym-metry is most striking in alliance defense issues, in which geography gives theCanadians a stronger bargaining position than it gives the Australians. TheAustralian fear that the United States would withdraw its protective force had only aweak analogue in Canada. On the three conflicts growing out of physical proximityand joint resource issues, Canada’s bargaining position was strengthened by thesymmetry in legal jurisdiction. And on several economic issues, although Canada wasmore vulnerable to American actions than Australia was, the United States was moresensitive to Canadian actions than to Australian actions. For example, Canada wasgranted an exemption from the interest equalization tax in 1963 after Canadianofficials showed their American counterparts that the two capital markets hadbecome so integrated that the damaging effects in Canada would feed back into theAmerican economy. So long as the Americans were not provoked to break the issue-specific regime and bring their overall lower vulnerability to bear, the Canadianscould play on American sensitivity dependence in certain issues.

You may recall our argument in Chapter 1, suggesting that skillful bargainingmay partially compensate for an unfavorable asymmetry in the structure of powerresources between partners. Although Canada depended on mutual trade more thanthe United States (11 percent of GNP compared to 1 percent of GNP), Canadiantrade was important enough to the United States (one-fourth of American exports)that Canada had a potential weapon for retaliation. The deterrence value of Canada’sability to inflict pain on the United States would depend on her will to suffer greatpain herself. And she was often willing to do that because of asymmetrical salience:the relationship was more important to Canada than to the United States.

Canada indeed proved to be willing in five of the conflict cases in which shewas able subtly to hint at possible retaliation. Unless guarantees were received,Canada threatened to cut off cooperation in security information.33 The possibilityof Canada’s diverting the Columbia River played a role in the Chicago water case.

175

TABLE 7.17 Conflicts with Outcomes Closer to Canadian Government Objectives, 1950–69

Conflict Jurisdiction

U.S. governmentsplit?

Low cost orsalience topresident?

Fear specificretaliation?

Fearlink?

De factotransna-tionally?

Transnationalorganizationrole?

Transgovern-mental role?

Politico-military

BOMARC U.S. Yes Yes — — Boeing Boeing Military

Security information U.S. Yes Yes Sec. info. — — — State Dept.

Economic

Chicago water Joint Yes No ColumbiaRiver

DEWline

Riparianstates

— State Dept.

Carling U.S. Yes Yes U.S.investment

— — — State Dept.

Oil U.S. No No Pipeline Defense Northernoil refiners

— —

Lumber U.S. No No — — — IWA; CrownZellerbach

—

Auto pact Joint No No Auto tariff — Auto cos. Auto cos. —

Totals 4 3 5 2 4 3 4


Possible retaliation against American corporations in Canada played a role in theCarling case.34 The possibility of building a cross-country pipeline that would resultin the exclusion of Venezuelan oil from Eastern Canada was part of the bargainingover exemption from oil quotas; and the possibility of a highly protected automobileindustry was hinted at during negotiations on the auto pact.*

Australia was less able to play on American sensitivity. Only in the meat quotacase did Australia apply similar tactics. Usually, however, Australia did not protestso vigorously or threaten retaliation for two reasons: there was less economicvulnerability and sensitivity interdependence in the relationship, and she wanted toensure the maintenance of American security protection. Australia’s flexibility inresponding to American economic actions was apparent in the aftermaths both ofAmerican lead and zinc quotas in 1958 and American balance of payments measuresafter 1963. After a temporary dip caused by American import quotas, Australiaincreased lead and zinc exports by value during the quota period (1957–58 versus1964–65) by about 80 percent.35 As we said earlier, after 1963, Australia adjustedsmoothly to the American interest equalization tax and capital controls, partlybecause of new revenues from increased mineral exports, and partly because ofborrowing in Europe. Even when Australia was hurt by American actions—as onthe wool tariff—resort to acrimonious recrimination or retaliatory threats wasinhibited by the government’s belief, between 1950 and 1969, that the mostimportant goal of Australian foreign policy was to maintain close ties with theUnited States, in order to receive continued protection. Australia’s deference to theUnited States shows up both in accessions to American requests and in failures tosecure American concessions. It reflects the Department of External Affairs’ almostexclusive concern with politico-security issues, and the prevailing postwarAustralian belief that the priority of foreign policy over domestic interests, and ofsecurity over economic objectives, could be maintained. In contrast to theCanadian-American situation, socioeconomic ties were minor enough, andchannels of contact sufficiently limited, that this approach could be sustained, atleast until the 1970s.36 Subsequently, it appears that the days of the hierarchy ofhigh and low politics in Australia’s foreign relations are ebbing, as security concernsbecome less acute and economic interdependence and transnational contacts grow.

On several issues, it seems to have been the intensity and coherence of thesmaller state’s bargaining position that led to different patterns of success. Canada,for example, protested American capital controls much more vigorously thanAustralia did. Australia did not, as far as the record shows, even protest the interestequalization tax at the presidential level; and after its protests about the 1965 capitalcontrols were rebuffed, the Australian government discovered that it could meet itscapital needs in spite of the controls.** Australia’s most important success in securing

*On replacing Venezuelan oil, see Lloyd, Canada in World Affairs, p. 86. During the auto negotiations theCanadians hinted at the possibility of a highly protected market like that of Mexico. As one participant put itin an interview, “we could occasionally point to our sombrero under the table.”

**Australia’s mineral export boom of the late 1960s helped, so that by the end of the 1960s Australia couldstop borrowing extensively in the U.S. market. See Australia in Facts and Figures, various issues. This conclusionwas confirmed by discussions with officials in the Australian Embassy in Washington, August 8, 1974.

Accounting for Differences in Outcomes 177

American assent to a request came on the issue of meat import quotas; in this case,Australia was the chief supplier of imported meat to the United States, and PrimeMinister Menzies wrote a letter in 1964 to President Johnson hinting strongly thatAustralia would retaliate against American products if a restrictive bill then beforethe Senate became law.37

Intensity and coherence of bargaining position are also related to the type ofpoliticization that an issue has undergone. Whether it is a spontaneous reaction totransnational processes or a result of manipulation by government leaders,politicization from below involves mobilizing groups to put pressure on the govern-ment. That government is placed in a strong position to make demands on theUnited States, to resist American demands, or even to threaten retaliation (asAustralia did in the meat case, or as Canada did over oil and the auto pact) thatmight from a strictly economic point of view be irrational. By contrast, politicizationof issues from below in the United States is carried out by more narrowly basedgroups, focusing principally on Congress. The United States public does notconsider either Canada or Australia important enough to generate broad, popularmovements. As a result, politicization from below in the United States (as in thelumber import or meat quota cases) often leads to divisions between Congress—orvocal elements in Congress—and the executive. Thus the pressures of demo-craticpolitics usually favor the smaller state in the bargaining process, because for them,politicization from below tends to lead to tough negotiating behavior and coherentstands by government, whereas for the United States such politicization leads tofragmentation of policy. Likewise, these pressures give Canada an advantage overAustralia, because the volume of transnational processes that help to stimulatepublic reaction is so much greater between the United States and Canada thanbetween the United States and Australia.

The second major explanation of Canada’s greater success in bargaining with theUnited States lies in the effects of the conditions of complex interdependence on thebargaining process. We observed earlier that the agenda of postwar Canadian-American relations differed from the other three situations partly because transnationalorganizations were more prominent in its formation. When we examine outcomes, itbecomes clear that outcomes on issues involving transnational organizations are morefavorable to Canada than on issues not involving transnational organizations: Canada“wins” six and “loses” three, with three equal outcomes.

Table 7.18 indicates the roles played by transnational organizations in thepolitical process and the importance of those roles. In several cases, transnationalorganizations proved to have interests of their own that did not always coincide withthe United States government’s. This differentiation meant that the transnationalorganization sometimes improved rather than weakened the Canadian govern-ment’s position in bargaining with the United States. As one American official saidof the role of the companies in the auto pact, “We knew about the Canadian plan toblackjack the companies, but we expected the companies to be harder bargainers.They didn’t have to give away so much. It must have been profitable to them.” Inthe auto pact, the letters of undertaking that Canada solicited from the auto compa-nies helped to ensure her larger share of the joint gains. In the oil case, lobbying in


the United States by large northern refiners helped Canada.38 And in the Arcticpollution case, the fact that Humble Oil needed Canadian approval and supportbefore it could undertake a second voyage greatly strengthened the de facto positionof the Canadian claim.39 On the other hand, in at least two cases (extraterritoriality,nuclear weapons), the United States government’s objectives were served by itsability to influence transnational and transgovernmental actors; and in two cases(the magazine tax and Seafarer’s International Union) one could argue thatAmerican-based transnational organizations were the real winners. Nevertheless,Canada did well, on the whole, in issues involving transnational organizations, evenin some of the most crucial issues affecting Canadian autonomy.40

Canada did even better in postwar issues involving transgovernmental relations;she came out ahead in five of eight cases in which transgovernmental relations wereimportant, whereas the United States came out ahead only once. For the otherrelationships, only three cases seemed to include significant transgovernmentalpolitics (liquor tax, Canada, 1936; wheat sales, Australia, 1959; and nonproliferation

TABLE 7.18 Cases of Transnational Organizations (TNOs) in the Political Process:Canada–United States

Importance of TNO to outcome

Outcome closerto objectives of TNO lobbied

TNO used bygovernment

Necessary

Magazine tax U.S. Time, Reader’s in bothcountries

—

Extraterritorial controls U.S. — U.S.

BOMARC Canada Boeing in bothcountries

—

Seafarer’s Union U.S. Union in Canada —

Payments guidelines Equal — U.S.

Auto pact Canada — Canada

Contributory

Columbia River Equal Kaiser in BritishColumbia

—

Oil import quotas Canada Oil companies in U.S. —

Lumber imports Canada Union and corp. inU.S.

—

Arctic zone Canada — Canada

Negligible

Carling Canada — —

Air routes Equal — —

Regime Change: Alternative Explanations 179

treaty, Australia, 1969). In each of these, final outcomes were closer to Canada’s orAustralia’s positions than to those of the United States. Governmental cohesion isimportant in determining outcomes, and in general, the United States was less cohe-sive than Canada and Australia. In part this lack of cohesion is a function of sheersize and of presidential as contrasted with parliamentary government, but it is also afunction of asymmetry of attention. The United States government does not focus onCanada or Australia the way that Canada, or even Australia, focuses on the UnitedStates. Greater cohesion and concentration helps to redress the disadvantage in size.The Cuban missile crisis and nuclear arms cases are informative exceptions to thisrule, in that the ideology of an interdependent defense community faced with a com-mon threat helped to legitimize the successful transgovernmental defense coalition.

In summary, though the patterns of outcomes that we discovered have manycauses, our detailed investigation indicates that the political processes of complexinterdependence, particularly the activities of transnational and transgovernmentalactors, were important. Of the four relationships we examined, the Canadian-American postwar relationship was closest to complex interdependence, and theexpected political processes help account for the surprising (from a simple structuralpoint of view) pattern of outcomes. More specifically, the difference between theprewar and postwar Canadian experience showed that complex interdependencewas not merely alliance politics or the absence of military force, but that the otherdefining conditions, particularly multiple channels of contact, were an importantcausal element.

REGIME CHANGE: ALTERNATIVE EXPLANATIONS

We have seen that the pattern of outcomes in the postwar Canadian-Americanrelationship is not well explained by a theory based on overall political structure. Itis clear that some of the characteristics of complex interdependence—particularlythe absence of military force and the proliferation of channels of contact betweensocieties—have made it more difficult than it would be under realist conditions forthe United States to exercise dominance in the relationship. The United States wasconstrained, furthermore, by the regime that developed between the two countriesafter the war, which limited opportunities for linkage among issues and emphasizedthe virtues of responsiveness and conciliation.

Yet we know that international regimes can be changed if they become intoler-able to states that have overwhelming underlying power. Why, then, did the UnitedStates not break the regime that has governed Canadian-American relations in thepostwar era? Let us look at how well our four models of regime change help toexplain the patterns that we have described.

According to our simple economic process model, the dramatic increase ineconomic sensitivity interdependence between the United States and Canadashould have led to a gradual regime change in the direction of increased politicalintegration. For example, George Ball speculated in 1968 that a high degree ofpolitical integration would follow from North American economic integration.41


Certainly economic integration was increasing. Exports to the United States rosefrom half to over two-thirds of Canada’s total exports between 1948 and 1970. Aswe saw, each country was the other’s largest trading partner, and their exports toeach other rose from 26 percent to 36 percent of their total exports during the1960s. This level of trade integration approached that of the European CommonMarket, and was greater than in several free trade areas.*

But political integration was limited. We can distinguish three types of politicalintegration: (1) the creation of common institutions; (2) the coordination ofpolicies (with or without institutions); (3) development of common identity andloyalty. For voluntary assimilation to occur, all three types must develop. Yet whenwe look at the Canadian-American case, there is a striking absence of the first andthird types. Indeed, one could argue that although there was some increase in thesecond type, there was a decrease in the third type.

The relationship to the growth of transnational interactions may not becoincidental. Indeed, under conditions of asymmetry rapidly rising transnationalinteractions seem to stimulate nationalism.42 One is tempted to go a step furtherand speculate that highly visible transnational organizations accentuate this effect.It is intriguing that the growing intensity of Canadian nationalism in the 1970s, asshown in public opinion polls,43 and the gradual development of governmentprograms for greater control of transnational organizations and communicationsfollowed the great economic boom of the early 1950s, when direct investment grewto exceed portfolio investment (1950) and nonresident control grew to more than50 percent of Canadian manufacturing (1956).44

Whatever its causes, rising nationalist attitudes affected Canadian governmentpolicies in patterns visible in high-level conflicts. As we saw, the agenda switchedfrom one primarily set by American government actions in the 1950s to onereflecting more Canadian government actions in the 1960s. Over the same period,outcomes closer to the Canadian government’s objectives also increased. Perhapseven more indicative is the fact that although several solutions to high-levelconflicts in the late 1950s and early 1960s could be called integrative in their effects(oil import exemption, balance of payments measures, air routes, auto pact), thesesolutions became infrequent in the 1970s.** Societal interdependence and policyinterdependence did not by themselves create a transnational sense of politicalcommunity. Nationalism and the nation-state were not banished from the politics ofbargaining in situations of complex interdependence. Quite the contrary: while theelephant roamed abroad, the beaver built dams.

The simple economic growth model does give a reason for the persistence of thepostwar nonlinkage norm in Canadian-American relations, however. Bothgovernments were aware of the welfare losses they would incur from a disruption ofeconomic integration, and of the necessity of some policy integration—preferably

*The analogous figure for the European Common Market in 1966 was 43 percent; European Free TradeAssociation, 25 percent; Latin American Free Trade Association, 10 percent.

**This has not been for lack of opportunity. For example, a Canadian regional subsidy to a Michelin tirefactory was treated as an export subsidy by the U.S., which imposed countervailing duties. A decade earlierone might have seen an integrative response to this situation of policy interdependence.


informal—to maintain the economic system. Though unwilling to develop a newregime that would reflect growing integration, both governments drew back fromactions that threatened the existing regime with its welfare benefits.

The overall structure explanation is best at explaining the prewar regimes andthe establishment of the postwar regimes in both cases. In the postwar period,however, it is better at accounting for the Australians’ failure to reap greater gainsfrom a regime that discouraged linkage than at explaining the Canadians’ postwargains and the United States’ failure to change the regime.

We found that explicit linkages between issues were most significant during theprewar period, when isolationism in all three countries made the bilateral structure ofpower more relevant than the global structure. During the 1920s and 1930s theUnited States frequently linked extraneous issues in order to exert the leverage of itsoverall preponderance, particularly in trade, against Canada. Against Australia, theUnited States drew linkages within issue areas, on such issues as wheat exports andtrade diversion. The United States consul-general in Australia in the 1930sproposed linking military protection of Australia to Australian concessions on tradeissues, but because of the isolationist mood of the times, his proposal was apparentlyrejected by the State Department.45 Canada and Australia tried linking issues(Canada linked salmon and halibut fisheries, and Trail Smelter pollution andDetroit air pollution; and Australia linked trade diversion with a trade agreement),but without success, as the Americans refused to accept the linkage.

Before World War II, a sense of common security objectives was absent fromboth relationships, particularly from that between the United States and Australia.It is therefore not surprising that relations were often acrimonious and that theUnited States, in particular, felt little need to make concessions to its smallertrading partners on economic issues. The norms that helped to preserve the muchmore responsive patterns of the postwar relationship arose out of a sense of commoninterest developed during close wartime and Cold War alliances. Both sides wereinterested in preserving the alliances and the friendly nature of the relationship. Inthe United States, the State and Defense departments had the most direct interestin these goals, and sometimes supported Canada or (more rarely) Australia againstthe Agriculture or Treasury departments.

From an overall structure point of view, however, the relationships were verydifferent. Throughout the two postwar decades under review, Australiangovernments believed that their country was dependent on American protection tocombat threats from Asia, whether from Japan, Indonesia, or China. They, as well asAmerican policymakers, believed that Australia was the more dependent partner,and their bargaining position suffered as a result. Although the United Statesdevoted far less attention to Australia than vice versa, Australia was unable to takeadvantage of this situation because of its sense of asymmetrical dependence insecurity issues. In this sense, the outcomes of Australian-American issues in the1950s and 1960s were largely structurally determined. For Australian governmentsbetween 1950 and 1969, the fear of weakening the American protective umbrella asa result of negative linkage to security issues was a pervasive source of concern.Because of the Australian subordination of economic issues to security issues,


American diplomats did not have to spell out the consequences for security of amajor and acrimonious disagreement on another issue.

In the 1950s Canada defined its security situation and its concern with globalorder not quite so deferentially as did Australia, but nevertheless in such a way thatit seems to have made equal or greater sacrifices to preserve the global structure ofrelations. By the mid- to late 1960s, the decline in the Cold War’s intensity,disillusionment with UN peacekeeping, technological obsolescence of defenseagainst bomber attacks, and the Vietnam War altered Canadian perceptions ofsecurity. Combined with rising domestic nationalism, these changes diminishedCanadian fear of disrupting either the global or North American pattern of relation-ships. Inhibitions on bargaining were therefore reduced. The norms and operatingstrategies of the relationship began to change. Thus, the structural constraints onCanadian policy eroded in the 1960s. Although the United States continued to bemuch more powerful overall than Canada, the Canadian government had learnedhow to use growing nationalism and public politicization to achieve greater gains inthe bilateral relationship.

But the overall structure explanation does not tell us why the United States didnot alter the regime once the Canadians began to depart from the rules of quietdiplomacy. According to the overall structure explanation, the declining securitythreat and eroding global hegemony should have made the United States lesswilling to pay the costs of leadership and thus more likely to initiate a change ofregime. The diminished importance of Canada in air defense in the 1960s shouldhave reinforced this trend—even though the United States could not, in thenuclear age, ever entirely disassociate itself from the defense of Canada.

But this does not fit the pattern of events. First, despite the symmetry ofinterdependence in defense in the 1950s, it was Canada more than the UnitedStates that restrained its bargaining in order to avoid disrupting the alliance, and itwas Canada that first began to change procedures in the 1960s. Second, althoughConnally’s actions in 1971 and 1972 infringed on regime norms in the direction thatthe overall structure explanation would predict, Connallyism did not last, and theregime has persisted without as large alterations as were expected at the time.

Issue structuralism contributes part of the explanation of persistence, though itdoes not adequately explain the change in Canadian bargaining in the 1960s. As wehave seen, for much of the early postwar period, Canadian tactics on bargaining andon politicization were summed up in the term quiet diplomacy. This is what issuestructuralism would expect. It was frequently argued that because of the asymmetryof power, public politicization was more likely to strengthen the American demands,whereas depoliticization would allow the bureaucratic managers of the alliance torelate issues to long-range joint interests.

For example, issue structuralism would predict that the Canadians would try todeal with issues in the International Joint Commission (IJC). The IJC wasestablished by the two governments in 1909 to deal largely with border issues, andhas traditionally dealt with issues on their specific merits rather than in terms ofnational political positions. In eighty cases up to 1970, the IJC’s six members (threefrom each country) divided along national lines in only four.46 The Canadian


government, therefore, often tried to steer cases into the IJC, where it couldneutralize American political strength, whereas the American governmentfrequently resisted relegating issues to the IJC. In the 1960s, however, on issues suchas maritime jurisdictional questions, where it had a revisionist position, theCanadian government avoided bilateral institutions. It took the lead in assertingcoastal state rights in the UN Law of the Sea Conference, in which weak stateslinked issues from below and the United States was in a minority position.47

In 1954, Senator Fulbright reflected an overall structure view when he saidthat he could not conceive of Canada’s “becoming powerful enough to be able to beunfriendly.”48 Similar statements are frequently made by Canadians. But friendli-ness is a question of degree. Contrary to imagined scenarios, during the energy cri-sis of the early 1970s, Canada was able greatly to change the rules of the game inNorth American energy trade. Not only did Canada charge OPEC-level prices toAmerican consumers, but she was also able to announce that she would completelyphase out petroleum sales to the United States. This unfriendly act did not lead toan American “ultimatum” (the title and expectation of a best-selling Canadiannovel in 1973); it led to acquiescence. In the winter of 1974, a number ofAmerican legislators proposed that America’s economic power be brought to bearon Canada by tariffs or taxes in the broader trade area, but these proposals were notimplemented. Part of the explanation is issue-structural: Canada was less vulnera-ble in the issue area because she was largely self-sufficient in oil. But that is not theentire explanation.

The international organization model contributes an important part of theexplanation. Recall that this model does not focus so much on formal internationalorganizations such as the United Nations (which are not particularly important inCanadian-American relations) as on the political processes of complex interde-pendence, to explain changes in international regimes. Informal patterns ofrelations—such as transgovernmental networks—are regarded, in this formulation,as important determinants of regime maintenance or change.

The norm of nonlinkage that tends to separate issue areas in Canadian-American relations represents an accommodation of foreign policy to conditions ofcomplex interdependence. When multiple issues and actors are involved, linkage isoften too costly in terms of domestic politics. No group wishes to see its intereststraded away. Threats of retaliation on an extraneous issue involve mobilization ofdifferent sets of actors and promote domestic politicization, which bureaucrats fearmay get out of control.

Of course there is bound to be some linkage. Diplomats admit that the overallstructure of relations is kept in the back of their minds. They were often concernedfor the interaction of issues that were proximate in time (for example, the auto pactand the magazine tax) as well as for the effect on the general climate of relations, butovert bargained linkages were too costly to employ.

Moreover, the transgovernmental networks that were part of the regime processproved to be an important source of regime stability. The efforts at centralizationand politicization in the Canadian-American relationship changed the style, but didnot curtail transgovernmental networks for very long. Canadian and American


officials involved in “managing” the relationship kept in close contact. Even duringthe 1971–72 period, State Department officials were able to use committees andrequests for studies to fend off punitive Treasury measures.49 Canadian andAmerican counterparts reached informal understandings in such a way that theactivities appeared to be domestic matters not requiring central oversight. For exam-ple, while oil spills in boundary waters are a heated issue in the politics of ecology,the two coast guards

operate under a single commander when on oil spill operations. . . . But if it waspresented as an integrated approach here in Washington, everyone from OMB tothe State Department and many others might want to become involved. Theresponse in Ottawa would be similar. Thus our contingency plans are coordinated,but not integrated. And it’s better and easier for everyone concerned.50

During and after the energy crisis of 1974, when Canadian curtailment of oilexports to the United States could have been the kind of visible and emotional issuethat mobilizes American public demands for the punitive use of our overall power,the transgovernmental network of officials cooperated in managing politicization.Informal transgovernmental interactions helped to maintain temporary Canadianoil supplies to the northern tier of American refineries, thus diminishing the pointsof potential domestic American politicization—particularly through theCongress—that might have pressed the American government to resist theCanadian change of the energy ball park.51 Such cooperation among officials inseveral agencies on both sides of the border involved decisions that would have beenboth too frequent and too controversial if carried out in the full glare of publicitythat accompanies high-level diplomacy. When faced with a potential politicizationcrisis, the regime procedures (though not the label) of quiet diplomacy wereresurrected to avert the threat.

As we argued in Chapter 3, it is unlikely that any single model (of regimechange) will fit all situations, and some situations will require a synthesis of explana-tions. But we also warned that it is most efficient to start with the simplest structuralexplanations first and to add complexity only as necessary. Because both prewarrelationships and the postwar Australian-American relationship are closer to theconditions of realism than to those of complex interdependence, one should expectthe overall structure model to provide a neat and simple explanation for these threecases. The postwar Canadian-American relationship, however, was closer tocomplex interdependence, and it was necessary to go beyond the overall structuremodel in constructing a synthetic explanation. The overall structure model helps toexplain the initiation of the postwar regime, and the nonlinkage norm in that regimehelps to explain why an issue structure model can account for the otherwisesurprising Canadian success in several high-level conflicts. But we needed to add thecomplexity of the international organization model reflecting a political processassociated with complex interdependence in order to explain shifts in the agenda ofthe relationship, the Canadian successes in at least six of the conflicts, and thepersistence of the nonlinkage regime. Finally, the economic growth model helped toexplain some of the incentives, though not the means, for maintaining the regime.


These findings pertain to policy as well as to theory. As we argued in the firstchapter, policy is based on (often implicit) theoretical assumptions. An appropriatepolicy cannot apply the same theoretical model to all situations without taking chang-ing conditions into account. The postwar Canadian case, though not typical of allworld politics, at least demonstrates that an approximation to complexinterdependence makes an important difference in the political bargaining process bywhich potential power is translated into power over outcomes. Thus, for example, asAustralia’s sense of security threat declines and communications technology reducesthe costly effects of geographical distance, one might expect the Australian-Americanrelationship increasingly to resemble the Canadian-American case.

More specifically, the postwar Canadian-American relationship indicates thatthis type of alliance regime, with its constant consultation and its focus more on thejoint gain than the zero-sum aspects of an interdependent relationship, does not relypurely on an outside security threat. It is true that as Soviet-American detenteprogressed in the 1960s, Canadian bargaining was less structurally constrained andbecame more assertive, but in the 1970s the regime seems to have been restabilizedon the basis of awareness of the potential joint losses from disrupting economicinterdependence and acceptance of the important role of informal transgovernmen-tal networks in managing relations under conditions of complex interdependence.Of course this restabilization does not mean that the regime could not be broken bya new threat. Nor does it imply that other aspects of the regime governing therelationship will not be altered; witness Canadian legislation in the 1970s thatestablished more restrictive procedures governing transnational corporate invest-ment and transnational communication through television and news magazines. Butthe relationship does show that regime stability need not require global hegemony,and that leadership in the maintenance of a regime may be shared.

We are not saying that one can generalize readily from our two cases to all bilateralrelations. For example, the United States’ relationship to Japan is geographicallyanalogous to that with Australia but cultural distance (not to mention history) mustalso be taken into account. And although the Mexican-American relationship isanalogous in some ways to the Canadian-American one, there is a greater socialdistance between the countries, both culturally and economically. This chapter shouldbe seen as a pilot-study generating hypotheses and providing suggestive evidence, as wellas testing a methodology for the analysis of bilateral relations. It is not a definitivetreatment of the effects of complex interdependence on bilateral relations.52

Bilateral relations between countries differ along a variety of dimensions,including cultural apparatus, levels of economic development, and the intensity oftransactions. It may help to place the Canadian-American and Australian–American relationships in context, however, to simplify somewhat and think ofbilateral relations as placed in two-dimensional space according to (1) the degreeto which conditions of complex interdependence are met; and (2) the asymmetryin the relationship. The Canadian-American relationship fits the conditions ofcomplex interdependence and is highly asymmetrical, in terms of the resourcesavailable to the two partners. A striking contrast is provided by the Soviet–American relationship during the Cold War, which fit the conditions of


complex interdependence very little but was highly symmetrical in capabilityterms. Figure 7.1 suggests where some other relationships would fit along thesetwo dimensions. Clearly, our two cases do not encompass the full range of varia-tion even on these dimensions. We used them as a matched pair differentiated bytheir approximation to complex interdependence conditions. We cannot attemptto generalize from these cases to all of world politics, or to suggest that Canadian-American relations necessarily reflect the wave of the future. We have, however,gained some insights into the politics of complex interdependence by analyzingthem. In the last chapter, we shall look at the problems of coping with complexinterdependence and the policy implications for the United States.

Hig

hA

SYM

ME

TR

YL

ow

Low

U.S.-Mexico

U.S.-Australia

U.S.-Japan

HighCOMPLEX INTERDEPENDENCE

U.S.-Britain

U.S.-Canada

France-Germany

U.S.-Cuba

U.S.-USSR

FIGURE 7.1 Bilateral relations on dimensions of complex interdependenceand asymmetry, 1970s

IV

187

� CHAPTER 8 COPING WITH INTERDEPENDENCEExplanatory Models and Conditions of World PoliticsPower in Complex InterdependenceTrends Toward Complex InterdependenceLeadership in Complex InterdependenceMultiple Leadership and Policy CoordinationBuilding the Legitimacy of International RegimesInternational and Domestic OrganizationConclusion

The United States andComplex Interdependence

PART


189

Interdependence has become a fashionable term, but its rhetorical use can be asource of confusion if we wish to understand world politics or foreign policy. Webegan this book by examining the rhetoric of interdependence and its implicationsfor policy; but we quickly discovered that we needed to examine the word, interde-pendence, and to investigate the politics of interdependence before we could makepolicy judgments. In this final chapter we return to the policy implications.

Although our analysis is not designed to provide precise prescriptions for policy, itdoes point out two major policy problems: international leadership and organization.Our analysis implies that more attention should be paid to the effect of governmentpolicies on international regimes. A policy that adversely affects or destroys a beneficialinternational regime may be unwise, even if its immediate, tangible effects are positive.Concern with maintenance and development of international regimes leads us to paymore attention to problems of leadership in world politics. What types of internationalleadership can be expected, and how can sufficient leadership be supplied? And focuson contemporary world leadership stimulates increased attention to problems ofinternational organization, broadly defined. In this book we have not proposed a set ofdetailed blueprints for the construction of policy. Rather we have addressed the policyproblem at its foundation by analyzing the changing nature of world politics. Without afirm theoretical underpinning, policy constructed in accord with even the bestblueprints for peace or world order is like the proverbial house built on shifting sand.

EXPLANATORY MODELS AND CONDITIONS OF WORLD POLITICS

In Chapter 1 we observed that the increasing use of the word interdependence reflects awidespread but imprecise feeling that the nature of world politics is changing. Wetherefore began with conceptual clarification. We defined interdependence in terms

Coping withInterdependence

8CHAPTER

189

190 Chapter 8 Coping with Interdependence

of costly effects, distinguished among different types of interdependence, and showedhow asymmetrical vulnerability interdependence can be used as a source of power inthe traditional game of politics among nations. Then in order to clarify the nature ofworld politics in this turbulent period, in Chapter 3 we presented (using as fewassumptions as possible) an economic process model and three contrasting politicalpower models of how the rules and procedures that govern interdependence change.

In Parts II and III we applied these models to four cases over the past half century.We found that the economic model never provided a sufficient explanation, althoughit was necessary for understanding most of the changes in international regimes withwhich we were concerned. Our overall structure model was simple enough to produceclear predictions, but, particularly in recent periods, the predictions were often off-target, catching only a small part of the changing reality. A second political modelbased on the structure of power in specific issue areas sacrificed some of the parsimonyof the first model but still yielded clear predictions based on incongruities betweenpower at two different levels within issue areas. Its accuracy was limited, however, byits inability to account for changes in regimes that resulted from changes in the overallpower structure or from patterns of international organization, broadly defined. Ourthird political model, which we called the international organization model, took intoaccount intergovernmental and transgovernmental networks and institutions, andtherefore enhanced our ability to explain postwar Canadian-American relations andrecent developments in the oceans and monetary issue areas. This result was achieved,however, at a considerable loss of parsimony and predictive power, because theinternational organization model was more indeterminate than those relying oneconomic process or underlying political structure.

In developing these models as we did—from the most simple and familiar to themore complex and novel—we sought a systematic rather than an ad hoc approach totheory-building. We tried to see how well one could explain international regimechange with simple models before relaxing simplifying assumptions. The more com-plex models were designed to take into account features of world politics associatedwith our ideal type of complex interdependence. Nevertheless, we sought analyticallyto distinguish between the conditions of world politics—whether characterized moreaccurately by realism or by complex interdependence—and our explanatory models.

Ultimately, however, satisfactory explanation involves showing under whatconditions one model or another (or a combination of them) will apply. In Chapters 6and 7 we provided some evidence from the oceans and money issue areas, and theUnited States’ relationships with Canada and Australia, that suggested a connec-tion between our two most novel theories (issue structuralism and internationalorganization) and the conditions of complex interdependence. Situations ofcomplex interdependence were not explained well by traditional theories, whereasconditions closer to the realist ideal were. One must be cautious about generalizingthese findings. To make more general statements, one would need more informationabout other issue areas and other country relationships. For the issue areas andrelationships considered, however, our research suggests two very important proposi-tions: (1) that issue structure and international organization models are required toexplain the politics of complex interdependence; and (2) that the conditions of

Explanatory Models and Conditions of World Politics 191

complex interdependence increasingly characterize world politics in some impor-tant issue areas and among some countries. Further research is needed to test thesepropositions in other cases and explore them with greater precision. Later in thischapter we shall show that there are good reasons to expect aspects of complexinterdependence to be important in world politics, in areas other than those wehave investigated closely here.

As we indicated earlier, however, our models would not provide the basis for acomplete examination of the politics of interdependence, even if we could specifythe conditions under which each of them, or each combination of them, wouldapply. In the first place, they do not focus directly on national policy, but on thedevelopment and decline of international regimes. Those who are trying to explainthe policies of particular states will find these models too abstract. Our level ofanalysis is the world system, rather than national policy. To analyze national policiesunder conditions of complex interdependence, one would need to ask two questionsthat are quite different from those that we have posed: (1) What range of choice isavailable to societies confronted with problems arising from interdependence; thatis, how severe are the external constraints? (2) What determines the responses thatare chosen and their success or failure?

To answer the first of these questions, one would have to analyze the effect ofcontemporary patterns of interdependence on state autonomy. The independentvariables would be attributes of the system; the question would be how severely theyconstrained the governments concerned. Our discussion of interdependence andregime change is helpful in defining these systemic independent variables; but it isnot very helpful in determining how severely particular governments areconstrained by the system. To answer the second question we would require closecomparative analysis of the domestic structures and political processes of particularstates, and we would need to draw heavily on work in comparative politics.1

We do not claim, therefore, to have developed a general theory of world politicsunder conditions of complex interdependence. Our systemic models would need tobe supplemented by analyses of the interplay between international interdepend-ence and domestic politics before such a theory could be constructed. In Chapter 7we explored that relationship to some degree for Canada and Australia, but hardlymore than to suggest some directions for further research.

Our systemic models alone are not adequate to analyze the politics of interde-pendence. But traditional views of the international system are even less so. Indeed,they fail even to focus on much of the relevant foreign policy agenda—those areasthat do not touch the security and autonomy of the state. Moreover, the policymaxims derived from such traditional wisdom will often be inappropriate. Yet themodernists who believe that social and economic interdependence have totallychanged the world fail to take elements of continuity into account. As a result, theirpolicy prescriptions often appear to be utopian. All four of our cases confirmed asignificant role, under some conditions, for the overall military power structure.Appropriate policies must take into account both continuity and change; they mustcombine elements of the traditional wisdom with new insights about the politics ofinterdependence.


POWER IN COMPLEX INTERDEPENDENCE

We particularly need to think carefully about the concept of power under conditionsof complex interdependence. Statesmen and scholars often use power to mean anability to get others to do something they would otherwise not do (and at an accept-able level of cost to oneself), but as we have seen, that kind of power has always beendifficult to measure, and has become increasingly so. In the traditionalist view, toknow the distribution of the resources that provide power capabilities is to know thestructure of world politics; and if we know the structure, we can predict patterns ofoutcomes. But there are two problems with this approach. First, the resources thatproduce power capabilities have changed. In the management of the classicaleighteenth-century balance of power in Europe, when a good infantry was thecrucial power resource, statesmen could calibrate the balance by counting thepopulation of conquered and transferred territories.2 The industrial revolutioncomplicated such calculations, and nuclear weapons, as a power resource too costlyto use except in an extreme situation, further weakened the relationship betweenmilitary power and power as control over outcomes. For many of the high priorityitems on the foreign policy agenda today, calculating the balance of military powerdoes not allow us to predict very well the outcome of events.

When we think of asymmetrical interdependence as a power resource insituations of complex interdependence, judgment and measurement are even morecomplicated. We have seen how being less vulnerable in a situation of mutualdependence can be used as a power resource. But it is difficult to calculate asymme-tries and, where there are many of them, to specify the linkages among them. Even ifwe felt fairly comfortable in our assessment of the power structure, whether based onasymmetries or military resources, we could not be sure of predicting outcomes well.

There is a second problem with the structural approach to power, whether inthe overall politico-military system or in the specific issue area. Measurable powerresources are not automatically translated into effective power over outcomes.Translation occurs by way of a political bargaining process in which skill,commitment, and coherence can, as we saw in our Canadian and oceans cases, beliepredictions based on the distribution of power resources. Thus, traditional foreignpolicy maxims derived from knowledge of the structure of world politics, either atthe overall military level or in terms of the asymmetries in an economic issue system,may be seriously misleading. Knowledge of the power structure is the simplest andthus the best starting point for policy analysis. But to predict and understandoutcomes, we must give equal attention to the bargaining process in which powerresources are translated into effective influence over outcomes.

Bargaining is important no matter what model of the system we use. We mustnote, however, the ways that the conditions of complex interdependence affect thebargaining process. The minimal role of military force means that governments turnto other instruments, such as manipulation of economic interdependence or oftransnational actors, as we saw in the Canadian-American relationship. Similarly,the inapplicability of military force means that considerable incongruity candevelop between the structure of overall military power and the structure of power

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in an issue area. Thus, we found in our study of money and oceans that one of theimportant questions about bargaining was whether issues would be handledseparately or linked to each other and to military security. Linkage among economicissues was one of several tactics for politicizing an issue, thus forcing it to a higherpriority on other countries’ foreign policy agendas.

If we could assume that linkage and politicization were controlled by rationalstatesmen in firm control of their governments and societies, then the bargainingprocess of complex interdependence could be quickly apprehended. But the factthat interdependence has different effects on different groups and that these groupspress multiple concerns on their governments and have multiple channels ofcontact across national boundaries greatly complicates the bargaining process. Byreducing the coherence of national positions, this complexity of actors and issuesstrongly affects the commitment to and credibility of threatened retaliation, which,as we saw in the Canadian and oceans cases, can contradict predictions made simplyon the basis of power resources. Similarly, they affect the bargaining process, as wealso saw in the oceans and Canada cases, by providing transnational allies, hostages,and instruments of manipulation.

Furthermore, as we saw in both the oceans and money cases, linkage can stimulatedomestic politicization, which can then turn the linkages to new purposes. For example,a critic of American oceans policy might say that all that was needed to maintain thefree seas regime was a stronger American lead, but this statement belittles the policyproblems of complex interdependence. As we saw in Chapter 5, the existence of multi-ple linked issues and domestic politicization has increased the number and demands ofdomestic American groups favoring extended coastal limits. The international contactsand potential transnational allies for such groups have also increased. Many of the mostserious policy problems of complex interdependence result directly from this blurring ofthe distinction between domestic and international politics. Policy conceived as if theworld consisted of billiard-ball states guided by philosopher-kings is not very useful. Forinternational regimes to govern situations of complex interdependence successfully theymust be congruent with the interests of powerfully placed domestic groups within majorstates, as well as with the structure of power among states.

TRENDS TOWARD COMPLEX INTERDEPENDENCE

How prevalent will complex interdependence be in world politics? Is it a temporaryaberration, or a permanent feature of world politics? Obviously, we cannot answerthese questions on the basis of the four cases in this book. And the differencesamong these cases should make us aware that any answer must be phrased as amatter of degree. Complex interdependence is less closely approximated in militarythan in economic or ecological issues and it seems less relevant to communist statesand many less developed states than it does to advanced industrial countries. Evenamong advanced countries, government control of social and economic interactionsvaries; the United States is characterized by a different relationship between thestate and society than is France or Japan.


These caveats notwithstanding, there are reasons to expect that significantaspects of world politics will continue to approximate the conditions of complexinterdependence. In some issue areas and some country relationships, complexinterdependence is deeply rooted. Although these conditions are not irreversible,major changes would be needed to reverse them. A strong argument could even bemade that complex interdependence will increasingly characterize world politics,because each of the three conditions of complex interdependence corresponds to along-term historical change with deep causes of its own.

The multiplicity of goals and difficulty in arranging them hierarchically areresults of the long-term development of the welfare state. During the twentiethcentury, governments in nearly all types of countries have increasingly been heldresponsible for more than military security. Although Israel’s situation is obviouslydifferent from France’s, and although a heightened tension in relations with Chinacould increase the attention of Western countries to military security, governmentswill continue to be held responsible for economic welfare.

The multiplicity and lack of hierarchy among goals are further complicated bythe many dimensions and definitions of economic welfare, and the contradictorychoices about foreign economic policy to which they give rise. One might caricatureattitudes toward foreign economic policies among Western states as follows: Forclassical mercantilists concerned with the power of the state, it was more blessed toexport than to import. The classical liberal economists who focused on consumerwelfare taught that it was more blessed to import than to export. The twentieth-century political mercantilists who focused on employment (producers’ welfare)during the Great Depression again favored exports. More recently, a new school ofnational ecologists who focus on environmental damage and prefer strip-miningabroad rather than at home, favor (certain) imports over exports.3 What we findpolitically, however, is not the dominance of one of these economic goals, but theircoexistence among powerful groups and a fluctuating pattern of priorities.

The development of multiple channels of contact reflects a long-term historicaltrend in the technology of communications and transportation. Jet aircraft havebrought Asia and America within a day’s journey from each other. Synchronous orbitsatellites have brought the costs of intercontinental phone calls into the same rangeas intercity calls. As Chapter 9 discusses, the Internet continues to shrink many ofthe costly barriers imposed by distance. Cheaper and improved communications arenot the only cause of transnational organizations or of transgovernmental contacts,but they did contribute strongly to their development. As we indicated in Chapter 2and discuss further from the perspective of the year 2000 in Chapter 9, authoritariangovernments can at some cost censor and curtail transnational communications andcontacts. Nevertheless, transnational communications are likely to continue tocreate social interdependence among more open societies.

The change in the role of military force is related to trends in the destructivenessof military technology and patterns of social mobilization. As we argued in Chapter 2,the use of force has been made more costly for major states by four conditions: risks ofnuclear escalation; resistance by people in poor, weak countries; uncertain andpossibly negative effects on the achievement of economic goals; and domestic

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opinion opposed to the human costs of the use of force. Even those states leastaffected by the fourth condition, such as those with authoritarian or totalitariangovernments, may feel some constraints from the first three. On the other hand,lesser states involved in regional rivalries and nonstate terrorist groups may find iteasier to use force than before. The net effect of these contrary trends in the role offorce is to erode hierarchy based on military power.

The erosion of international hierarchy is sometimes portrayed as a decline ofAmerican power, and analogies are drawn to the earlier decline of British hegemony.Admittedly, from the perspective of a policymaker of the 1950s, there has been adecline. But American power resources have not declined as dramatically as is oftensupposed. American military spending was roughly a third of the world total in 1950and remained so in 1975. Over the same period, the American gross nationalproduct declined from slightly more than a third to slightly more than a quarter ofthe world total; but the earlier figure reflects the abnormal wartime destruction ofEurope and Japan, and the 1975 figure still remained twice the size of the Sovieteconomy, more than three times the size of Japan’s, and four times the size of WestGermany’s. In power resources, unlike Britain in the late nineteenth century,America remains the most powerful country in the world.*

Rather than resorting to historical analogy, we should consider the decline inhierarchy as a systemic change. In terms of our distinction between power overothers and power over outcomes, the decline of hierarchy is not so much an erosionof the power resources of the dominant state compared with those of other countries,as an erosion of the dominant state’s power to control outcomes in the internationalsystem. The main reason is that the system itself has become more complex. Thereare more issues and more actors; and the weak assert themselves more. The dominantstate still has leverage over others, but it has far less leverage over the whole system.

From some points of view, this decline of hierarchy in the international systemindicates a desirable trend toward democratization and equality in the world. Someobservers have argued that the growth of an “invisible continent of nonterritorialactors” can lead to a world in which “loyalty entropy and geographical entropy willbe so high that we very much doubt that major world wars will be feasible.”4

Functionalist theorists who envisaged a transformation of world politics through thecoalescing of specific interests—both private groups and public bureaucracies—across national boundaries to such an extent that military capabilities and nationalsovereignty would gradually wither away could also regard trends toward complexinterdependence as proof of progress.5

Our view of the future is less sanguine. So long as complex interdependencedoes not encompass all issue areas and relationships among all major states, theremaining role of military force will require sovereign states to maintain militarycapabilities. Moreover, so long as the world is characterized by enormous inequalityof incomes among states—a condition that cannot be changed quickly even on themost optimistic of assumptions about economic growth—citizens are likely to resist

*With the collapse of the Soviet Union, this statement is even more valid in 2000 than when we wroteit in 1976.


the dismantling of national sovereignty. The increase in complexity and decline ofhierarchy may simply result in the absence of any effective leadership in organizinginternational collective action.

LEADERSHIP IN COMPLEX INTERDEPENDENCE

Leadership, of course, can be a self-serving term used by a dominant state to justifyany of its actions. Yet in the organization of collective action to cope with economicand ecological interdependence, leadership is often crucial to ensure that behaviorfocuses on joint gains rather than the zero-sum aspects of interdependence. AsCharles Kindleberger has argued, “If leadership is thought of as the provision of thepublic good of responsibility, rather than exploitation of followers or the privategood of prestige, it remains a positive idea....Leadership is necessary in the absenceof delegated authority.”6 And such orderly delegation of authority in world politics isnot likely. Leadership can take a variety of forms. In common parlance, leadershipcan mean: (1) to direct or command; (2) to go first; and (3) to induce. Thesedefinitions roughly correspond to three types of international leadership: hegemony,unilateralism, and multilateralism.

We defined hegemonic leadership in Chapter 3 as a situation in which one state“is powerful enough to maintain the essential rules governing interstate relations,and is willing to do so.” Clearly, hegemonic leadership is one way in which a publicgood—responsibility—can be supplied. But the hegemonic leader will constantly betempted to use its leadership position for the sake of specific, self-oriented gains.Observers and pundits may plead for self-restraint in the exercise of power; but whendomestic political pressures, reflected particularly in electoral politics, becomeacute, such advice will frequently be ignored. In any case, other governments willexpect, at crucial moments, to be ignored, and will endeavor to avoid being put intopositions where they are asymmetrically vulnerable, or even very sensitive, to theleader’s decisions, when this can be avoided. Willing submission to hegemonicleadership is difficult to maintain for long, because the legitimacy (if not the power)of such leadership tends to erode. What in the eyes of the powerful appears to bepolicing for the public good may appear in the eyes of the weak as imperialistbullying. As such perceptions differ, the need for compulsion in hegemonic leader-ship increases. As we have seen, under conditions of complex interdependencecompulsion becomes problematic.

A second type of international leadership is unilateral initiative that, for betteror worse, sets an international example. A large state may not be able or willing topolice the behavior of other states, but because of its size and importance, its actionsmay determine the regimes that govern situations of interdependence, both becauseof its direct effects and through imitation.

The rules made by the United States—and made in response for the most partto domestic political pressures and domestic economic and social needs—arealmost always the most important set of national rules affecting operators in

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international markets. . . . Consider the international repercussions of inter-est-rate policies pursued by the Federal Reserve Board, of air transport rulingsgiven by the Civil Aeronautics Board, of stock market regulations enforced bythe Securities Exchange Commission. They are all much more influential onoperational bargaining processes than the rules laid down by any other nation-state [emphasis in the original].7

Such leadership may have unintended systemic effects (as Truman’s initiative in1945 led to a weakening of the free seas regime for the oceans) or it may be quitedeliberate (as unilateral American suspension of convertibility forced a change ofthe Bretton Woods regime in monetary affairs).

International leadership as unilateral initiative—going first and setting anexample—still exists in complex interdependence. As we have seen, because theAmerican economy is dominant and less vulnerable than those of such countries asJapan, Germany, or France, the United States has more leeway in foreign economicpolicy than those countries do. Thus it is inaccurate to describe complex interde-pendence as a completely stalemated system in which every actor has a veto powerand collective action is impossible. On the other hand, the initiatives taken by theleading state may not always set a good example from the point of view of creatingor maintaining a regime from which all states gain; witness the brief but destabiliz-ing American embargo on the export of soybeans as a response to rising domesticfood prices in the summer of 1973.

A third type of leadership is based on action to induce other states to helpstabilize an international regime. Leading states forego short-run gains in bargainingin order to secure the long-run gains associated with stable international regimes.Large states are most likely to make such short-run sacrifices, because they are likelyto be major beneficiaries of the regime and they can expect their initiatives to havesignificant effects on world politics. Yet for such leadership to be sustainable undernonhegemonic conditions, other states must cooperate somewhat. If too manymiddle-level states are free riders, growing resentment among powerful groupswithin the leading states may diminish those states’ willingness to forego short-rungains. Cooperation by middle-level states, however, will depend in turn on thelegitimacy of the regime—the widespread perception that it is indeed in theinterests of all major parties.

The trends that have eroded hierarchy and that produce complex interdepend-ence do not seem likely suddenly to be reversed. Although the United States stillhas the most powerful economy in the world, the prospects for Americanhegemony—to the point of being able to determine and maintain the rules—areslim. The likelihood that any other state will be able to exercise such dominance isalmost nil. Unless drastic changes take place in world politics—such as a renewal ofa strong Soviet threat to the military security of Western Europe and Japan—hegemonic leadership will therefore be out of the question. The choice willessentially be between nonhegemonic leadership and no effective leadership at all.*

*Note for Third Edition: we obviously failed to anticipate the collapse of the Soviet Union and theconsequence that the United States became the sole superpower.


Effective nonhegemonic leadership depends to some extent on unilateral initia-tives setting good examples, but it also requires cooperation to maintain regimesover the long term. It therefore involves a combination of the second and thirdtypes of leadership discussed before. Leadership in these terms does not conferspecial material benefits, although it may carry high status as well as the ability toshape the agenda for interstate discussions. If nonhegemonic leadership is to beeffective, furthermore, all major parties must believe that the regime being createdor maintained is indeed in their interests. Any leadership requires legitimacy, whichinduces willingness to follow and to forego the option of free riding or cheating onthe regime that corrodes the incentive for leadership. But legitimacy and willingnessto follow is particularly important in nonhegemonic situations, because the coerciveelement is diminished. Assuring the stability of international regimes under condi-tions of complex interdependence will require multiple leadership and practices thatbuild legitimacy of regimes.

MULTIPLE LEADERSHIP AND POLICY COORDINATION

Charles Kindleberger has claimed that effective international leadership must beunitary, not collective: “For the world economy to be stabilized there has to be astabilizer, one stabilizer.”8 Politically, however, it is extraordinarily difficult forunitary leadership to be effective in the absence of hegemonial power. The leadingstate may have habits left over from the period of hegemony, and thus assume that itcan change or maintain the rules of the game without effective consultation. Thatassumption can lead to resentment and loss of legitimacy, such as we havefrequently seen in American-European relations over the past decade. If, on theother hand, the leading state recognizes that it can no longer exercise hegemonicpower, leadership will involve being willing to make the first concessions and totake the most farsighted approach. When its margin of superiority over its partners(and rivals) is diminishing, however, this will be difficult. Finally, no matter howconciliatory the leader is, the patron-client relationships that result from unitaryleadership will raise status anxieties on the part of other governments, and fomentresentment on both sides.

Unitary leadership under the conditions of complex interdependence is thereforeunlikely to be effective. As Kindleberger points out, however, collective leadership hasnot generally worked in the past. Should we therefore conclude that under complexinterdependence, neither type of leadership will be effective?

Clearly, certain well-entrenched patterns of governmental behavior will have tochange before collective leadership can be developed. First of all, there will need tobe a general acceptance of “collective economic security” as a principle for theconduct of international economic policy.9 In other words, the preponderant stateas well as other major states must be willing to accept mutual surveillance of domes-tic and foreign economic policies, criticism of these policies by other governments,and coordinated interventions in certain international markets. The illusion thatmajor macroeconomic policies can be purely domestic will have to be discarded,

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along with the search for total control over one’s own economic system. This doesnot mean that governments will give up control over their economies to interna-tional organizations with sovereign power, but that they will accept much moreinternational participation in their decision-making processes than they have in thepast. Domestic fiscal and monetary policies, as well as foreign trade, capital, andexchange rate policies, will have to come under surveillance by the internationalcommunity.

The need for international surveillance and collective leadership is at least asevident in other areas as in macroeconomic policy. If nuclear proliferation is to bekept under even a semblance of control, cooperation among suppliers of nuclearequipment and materials will be necessary. Effective action to prevent large-scalefamine may, in the future, require similar multinational collaboration. Pollution ofthe atmosphere and the oceans knows no boundaries; domestic air and waterpollution control programs will have major effects on the extent of internationallyborne pollution. Already, there is extensive international cooperation for developingand regulating communications satellites.10

It is not enough, however, to recommend that leadership be shared. Often, toput a new issue on the interstate agenda or to encourage active consideration of anew proposal, one government will have to take the lead. Yet governments arefrequently sensitive about status, as well as about the power and dependenceimplications of leadership. Thus, in a world of many issues, linked more or lessclosely to one another but still significantly differentiated, the leader on one issuewill need to be a follower on another. More powerful states, such as the UnitedStates, will have a greater effect on more issues; but for symbolic as well assubstantive reasons, several states will need to take leadership roles. This can helpto diminish the tendency of middle-ranking states to adopt free-rider strategies.Multiple leadership is perhaps a more apt term for this differentiated process ofinitiative-taking than collective leadership.

The leaders of any particular issue should be those with large states in a regimeand a political and economic situation at home that allows them some leeway forleadership on the issue. If initiatives are left to those governments that regardthemselves as having small stakes and no margin for maneuver, parochial and self-protective responses are likely to result. Thus leadership must be assumed primarilyby the powerful and self-confident states.

Even with this acceptance of international surveillance and action, coordi-nating collective leadership will be difficult. Summit conferences will help—asin Europe since 1969 and among the world’s major economic powers atRambouillet during November 1975. The formation of international cabinet-level committees, and specific international organizations, which are proliferat-ing within the OECD area, should also contribute. Equally important, however,will be the informal networks of working relationships at a lower level of thebureaucracy, among like-minded officials and those with similar tasks, networksthat we have described as transgovernmental. The convergence of views andperspectives that these multiple contacts can create will be crucial in effectivelycoordinating policy.


In other words, the very complexity of relationships, and the multiplicity ofcontacts between societies, can contribute a considerable mutual adjustment of policyeven when conflict exists and formal rules cannot be developed. The trade warspredicted in 1971 did not materialize, and international monetary reform did take place(although after a considerable period of uncertainty). Contrary to the Cassandra-likepredictions of the neomercantilists, major developed countries did not initially react tothe petroleum crisis by imposing unilateral trade measures or manipulating the values oftheir currencies. On the contrary, in June 1974 and again in 1975, the OECD countriespledged to avoid solving their energy problems by beggar-thy-neighbor trade policies.Competition for exports, particularly to oil producers, has taken place; and there wassome increased protectionism. But the overall response was moderate. The politics ofcomplex interdependence are not neat, but neither have they proved as unstable asmany predicted they would be when threatened by economic crisis.

These contacts will usually occur within the framework of international organiza-tions as will meetings between higher-level officials. As we saw in Chapter 5, animportant but little-noticed function of international organizations in world politics isto provide the arena for subunits of governments to turn potential or tacit coalitionsinto explicit coalitions characterized by direct communication. Thus internationalorganizations can facilitate the informal transgovernmental networks that are requiredfor managing interdependence. International organizations are by no means a substi-tute for leadership, but they may contribute to its development and nurturing.

We are not arguing for a trilateral oligopoly of the United States, Germany, andJapan, nor for a closed community of rich states. Policy coordination and multipleleadership can more readily be organized among a small number of actors withsimilar perceptions of legitimacy, but participation in and benefits from such regimescan be made available to others if they so choose. Leadership in our terms doesnot confer special benefits, but rather implies special obligations to offer the firstconcessions and to exercise foresight in the interest of the overall structure. Thisincludes a concern for North-South distributional problems. The major industrialcountries will need to take the initiative in adapting international regimes to theneeds of the Third World by offering substantial concessions and entering into asustained bargaining process.

BUILDING THE LEGITIMACY OF INTERNATIONAL REGIMES

Problems arising from interdependence and technological change will not be solvedat one international conference or even in a cluster of such negotiations over a shorttime. Indeed, policy coordination should be seen as stretching indefinitely into thefuture. Responsible leaders will therefore understand that they have a reason formaintaining the good will of other major actors and a constructive problem-solvingatmosphere; they will be reluctant to seek short-term victories (either throughmajoritarian resolutions or unilateral action) if such victories could jeopardize thenegotiating process over the long term.

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Multiple leadership will be difficult enough among advanced industrialized coun-tries with pluralist political systems. It will be much more difficult, perhaps sometimesimpossible, when Russia and China are involved, or when less developed states arebrought into the picture. If international regimes involving these poor states are tobecome legitimate, industrialized countries must be willing to transfer significant realresources, while allowing these countries the freedom to make internal social andeconomic changes. The industrialized countries, in turn, will need to be convincedthat concessions lead to more than escalated demands, and that the practical arrange-ments for regulating the world economy will be workable and fairly efficient. Thenegotiating process must hold out an attractive vision of the distant future (to keepboth parties in the game); it also must provide, from time to time, specific payoffs thatcan be pointed to as evidence that the system works. Both sides will require thesepayoffs, although for the poorer states they may be principally material, whereas forthe wealthy ones, improvements in the political climate may be more important.

If bargains between rich and poor are struck, they will have to be largely self-enforcing. Other forms of enforcement will rarely be available, or desirable. Effectivestrategies will have to appeal to elites’ perceptions of their self-interests; appeals toaltruism or to concepts of equity or global welfare are unlikely to be sufficient.Government leaders are often capable of learning how to achieve their goals in amore cooperative way; over time, their perceptions of self-interest may change. Sucha learning process will be of critical importance internationally in future years.11

Although multiple leadership and multiple hierarchies help to spread status anddiminish incentives for free-rider strategies among the leading states, the bottom ofthe various hierarchies will usually consist of the same poor, weak states. For inter-national regimes to appear legitimate to such states, they must perceive that they arereceiving a significant share of joint gains, in relation both to other states and to thetransnational actors. They must also perceive the power and status hierarchy of theinternational system as a relatively open one. As states develop their capabilities,they must be both permitted to share the status and encouraged to share the burdensof collective leadership.

Finally, if poor states are not to perceive international regimes for regulatinginterdependence as a form of imperialism, they must be free to decide for themselveshow much they wish to participate. It has become commonplace to realize that theideology of free trade in the nineteenth century served the interests of Britain as themost advanced state, and that there can be economic neocolonialism or an imperi-alism of free trade (and investment). At the same time, politically autonomous smallstates can benefit from having the option of an open economic system, when force isnot used by powerful states to impose such a system on them.

INTERNATIONAL AND DOMESTIC ORGANIZATION

Organizing for international collective action poses a particular problem for theUnited States. Americans are so used to being dominant in the world that, when aproblem arises about which important groups in domestic politics feel strongly, there


is immediate emphasis on unilateral action. The adverse environmental effects ofsupersonic aircraft are to be dealt with by denying landing rights in the UnitedStates to the Concorde; nuclear proliferation is to be controlled by a unilateral banon the export of material from the United States; the world is to be fed by Americanwheat exports; and effective population control is to be facilitated by changesin United States foreign aid policies. In each case, the goal is a worthy one—environmental quality, control of nuclear proliferation, alleviation of hunger,limitation of population growth. Yet in a world no longer dominated by Americanpower, unilateral American approaches of this sort may, in the long run, bedetrimental even to the goals being sought. If they disrupt cooperative internationalrelationships and cast doubt on American motivations (or create negative reactionsto American self-righteousness), such approaches may destroy the basis forlegitimate international regimes. Supersonic aircraft can still fly where the UnitedStates’ writ does not run; other nuclear suppliers can increase their exports ofnuclear materials; the United States is unlikely in the long run to be able to feed theworld; and American attempts to control population growth abroad may be seen bynationalist leaders as attempts at “genocide.” Perhaps the United States should takeall of these actions, but within the context of international discussion, bargaining,and (where possible) agreement, rather than unilaterally.

As we have shown earlier, many of the relevant policy decisions in situations ofcomplex interdependence will appear in traditional political perceptions to bedomestic rather than foreign. We can think of sensitivity interdependence, whetherthrough a market relationship or a flow of goods or people, as a transnational systemcrossing national boundaries. To affect such a system, governments can intervene atdifferent policy points: domestically, at their own borders; through internationalorganization, at another country’s border; or inside the domestic jurisdiction ofanother country. Different points of intervention impose different costs andbenefits. Political struggles will arise over who pays the costs of any change. Suchleaders as the president or secretary of state will often prefer policies proposingequitable international sharing of costs or even, as a price for retaining internationalleadership, a disproportionate American share. But leverage over domestic points ofintervention will be held by bureaucrats and congressmen whose responsibilities areoften to narrower and more immediate interests.

Thus, foreign policy leaders dealing with these new issues will have to pay evenmore attention than usual to domestic politics. Foreign policy strategy will have toinclude a domestic political strategy that will permit the United States to focus onits long-term systemic interests. Different issues, for example, trade and money, havedifferent political characteristics. Even though they may have the same effect onemployment, trade issues usually involve many political groups, whereas monetaryissues rarely do. Foreign policy leaders will have to formulate their strategies in termsof such likely patterns of politicization.

They will have to pay special attention to the way that their internationalbargaining linkages, threats of retaliation, and choice of international forumaffect domestic politics as well as the creation of transnational alliances. Theywill have to anticipate points of strain. At home, they will have to pay more


attention to compensating groups that bear the heaviest costs of adjustment tochange. A good example is the comparative generosity of the adjustmentassistance in the 1974 trade legislation designed to stave off the restrictive alter-native Burke-Hartke bill, compared with the narrow adjustment assistance provi-sion of the Trade Expansion Act that President Kennedy pressed as part of agrand security design in the early 1960s.

Defining national interests is usually difficult, but on issues of economic andecological interdependence, it becomes even more so. These issues directly affectparticular groups, and touch the lives of nearly all citizens. If domestic interestgroups are powerful enough to block policies favored by the president—such as thepolicy of selling large quantities of grain to the Soviet Union in September 1975—top officials may no longer be able to determine policy. As AFL-CIO PresidentGeorge Meany expressed it at that time, “foreign policy is too damned important tobe left to the secretary of state.”12 In such a situation the judgment of top-levelofficials may no longer be authoritative.

During the Cold War this problem was met by placing economic issues belowmilitary security in the foreign policy hierarchy. We saw that distant-waterfishermen, representing less than a quarter of the American catch, were able,through an alliance of convenience with the navy, to define American fisheriespolicy in terms of narrow coastal limits. Similarly, in monetary policy, the UnitedStates accommodated its interests to considerations of alliance leadership. After themid-1960s, the Soviet threat seemed less imminent. In the oceans area, strength-ened by the law of the sea negotiations, American coastal fishermen (though repre-senting a minor economic interest) successfully pressed Congress for a 200-mileextension of coastal jurisdiction, over the navy’s objections. In monetary policy, ourallies themselves seemed to pose an economic challenge, and American interestswere defined with less concern for preserving the postwar monetary regime or forEuropean sensibilities. As the symbolism of national security is weakened, itbecomes more difficult to establish a political consensus on priorities.

The rhetoric of interdependence and symbols of economic and ecologicalsecurity are likely, however, to be imperfect substitutes for the traditional militarysecurity imagery. Economic interdependence affects different groups in very differ-ent ways. Grain sales to the Soviet Union, for instance, may have helped detente inthe 1970s, and such sales boosted farmers’ (and grain exporting companies’)incomes. However, they could also have had an inflationary effect on food prices inthe United States. Whether grain sales would provide the United States with auseful foreign policy tool in relations with the USSR, by creating vulnerabilitydependence, was also unclear in the 1970s. If not in the short run, what about themore distant future? Would the United States be unable to use this potential toolbecause domestic groups with an interest in the profitable transactions will lobby tomaintain the relationship? When the conditions of complex interdependence areuneven, and one society bears more of its marks than another, the vulnerabilitypatterns cannot be determined from simple statistics. When domestic burdens andbenefits fall unevenly, leaders will find it difficult to make such subtle calculationsand indulge their finely balanced judgments. Ecological dangers, by contrast, would


often affect everyone fairly equally. But because they are long-term threats and theshort-term costs of ensuring against them are unevenly distributed, “ecologicalsecurity” is unlikely to be a sufficient symbol around which leaders can build a newforeign policy consensus.

Concern about economic and ecological issues can lead both to independentpolicies and to greater involvement in international policy coordination. Indeed, itis quite plausible to expect an inconsistent and incoherent pattern of involvementand withdrawal. Isolationist policies will be tempting as responses to the frustrationsin dealing with a world no longer under hegemonic control. There will be a tensionbetween the United States’ increasing involvement in the world economy and itsdeclining control over that economy. Increasing awareness of the need tocoordinate environmental policy internationally will coexist uneasily with theawareness that other governments may have very different priorities and may beextremely difficult to influence.

It is possible to design independent economic strategies by which the UnitedStates could reduce its economic vulnerability to external events. Consider, forinstance, the often-discussed problem of raw materials. If one were concerned aboutother countries’ refusals (or inability due to declining reserves) to sell energy or materi-als, one could restrict total imports, diversify sources of supply, build up stockpiles, anddesign contingency plans for rationing supplies in the event of sudden deprivation.Over the longer run, the United States could invest in technologies to produce newsources and substitutes. Given time, technology can change the seemingly inexorabledependence supposedly implied by figures about known reserves.

Yet the important question is not whether independent security strategies aretechnologically feasible, but how far they should be followed and the uses to whichthey should be put. Reducing one’s vulnerability to external events can be part of aneoisolationist strategy; but it can also be one element in a strategy of policycoordination and international leadership. If we recall our discussion in Chapter 1of asymmetrical vulnerabilities as sources of power, we can see why this is so. Forpolicy coordination a state requires power in diverse issue areas, in order to persuadeothers to compromise, and to make sacrifices. Insofar as one state can limit itsvulnerability to actions by others, it will increase its ability to influence interna-tional negotiations about collective economic and ecological security.

At low levels of cost, efforts to increase self-sufficiency are therefore desirablefor a strategy of policy coordination and leadership as well as for a neoisolationistapproach. The key question between these two policy orientations turns on how farthe development of independence should proceed, and at what costs. Takenseparately, each “project independence” that neoisolationists propose to reduce ourvulnerability dependence might be tolerable. But when one adds them together, onehas a heavy burden to impose on the American people—particularly if many ofthese costs could be avoided by more effective American leadership in world affairs.Moreover, if the environmental pessimists are even partially correct, the burden willgrow heavier. Even when it has the capacity for independent action, the UnitedStates continues to have an interest in international policy coordination—overwhich, in such a situation, it would of course have considerable influence.


For some ecological issues the argument for international action is evenstronger. When a collective good, such as the atmosphere or the oceans, is threat-ened with degradation by pollutants from many countries, action by one state aloneis unlikely to solve the problem. Yet here again the point is not simply that ecologi-cal dangers or finite resources increase interdependence. The key issue is whetherthe major countries of the world will have the social and governmental ability torespond in time. Will they plan so that the right technology will be available intime, or so that conservation measures can be put into effect before irreversibledamage is done? Will we know enough about the adverse effects of technology, andhave sufficient control over its development, that we do not create technologicalmonsters? Will international organizations facilitate effective collaboration amonggovernments on such questions?

If we viewed international organizations as formal institutions whose effective-ness depended on their autonomy, it would be difficult to be optimistic. Very little inthe record of 1945–1975 suggests that intergovernmental organizations such as theUnited Nations, or even more successful integrative arrangements such as those ofthe European Community, will become increasingly autonomous and powerful inworld politics. On the contrary, these organizations are often divided by controversyand weakened by lack of governmental support, political as well as financial.*

This approach, however, reflects an archaic view of international organizationsas incipient world governments. We need to think of international organizationsless as institutions than as clusters of intergovernmental and transgovernmentalnetworks associated with the formal institutions. Governments must be organized tocope with the flow of business in these organizations; and as governments deal withthe organizations, networks develop that bring officials together on a regular, face-to-face basis. International organizations may therefore help to activate “potentialcoalitions” in world politics, by facilitating communication between certain elites;secretariats of organizations may speed up this process through their own coalition-building activities.13 Leadership will not come from international organizations, norwill effective power; but such organizations will provide the basis for the day-to-daypolicy coordination on which effective multiple leadership depends.

From this perspective it is not surprising that—despite their weakness as“governments writ large”—the number of intergovernmental organizations morethan tripled between 1945 and 1965.14 As Table 8.1 indicates, the United Statesparticipated in almost three times as many international meetings in 1975 as in1950. Between 1964 and 1974, the number of accredited government delegates tointernational conferences and agencies increased by over 150 percent—and fewerthan half of the American delegates in 1968 and 1974 came from the StateDepartment.

Because international organizations and meetings are so important as centers ofinformal networks, the proliferation of international activities by apparently domesticagencies is also a natural development. State Department personnel account for less

*Note to Third Edition: We were, broadly speaking, correct about the United Nations but too pessimisticabout the European Community (now European Union).


TABLE 8.1 United States Transgovernmental Contacts

Accredited government delegates to conferences and agencies

Year

International meetingswith official U.S. participation

Total delegates (46 agencies)

State department delegates as percentage of total

1946 141 — —

1950 291 — —

1960 394 — —

1964 547 2,378 52

1968 588 2,137 48

1974 — 3,656b 44

1975 817a — —

a 1975 as percentage of 1960: 207%b 1974 as percentage of 1964: 154%Source: Data supplied by U.S. State Department, Bureau of International Organization.

than a fifth of all Americans in diplomatic missions overseas; the rest come from sometwenty-three government agencies. Because many of the issues involved are techni-cally complex, technically sophisticated agencies, which have particular domesticconstituencies, must be intimately involved in the process, and they must maintainclose ties with their counterparts abroad. Thus miniature foreign offices, which haveevolved in many United States domestic agencies, are not mere bureaucraticnuisances but have a positive role in managing interdependence. They need to besufficiently well controlled that they do not establish separate bureaucratic fiefdomsthat form coalitions with counterpart agencies to thwart official government policy;but the transgovernmental policy coordination that they engage in is essential.

Transgovernmental policy coordination is particularly beneficial when officialsfrom technical agencies of different governments work together to solve joint prob-lems, or when interactions facilitate learning. Occasionally, a sense of collegialityleads to especially effective problem-solving behavior. Sophisticated attitudestoward international cooperation, and increased sensitivity to the internationalaspects of problems, may thereby become increasingly diffused throughout thegovernment. Because international organizations often provide arenas for policycoordination, officials of operating agencies may develop close and mutuallybeneficial relationships with those organizations, and their secretariats, as well. Thefunction of central foreign policy organs such as the State Department should be toencourage constructive transgovernmental contacts of this type, and to orient theagencies involved toward broader views of world order, rather than toward their

Conclusion 207

narrowly defined problems. There should be no attempt to cut off such contacts;such an attempt would be futile. To destroy such networks would be to weakeninternational organization.

CONCLUSION

The growth of economic and ecological interdependence does not provide clear,deterministic guidelines for foreign policy. There is still a “necessity for choice.” Theconditions of complex interdependence make the choices harder. The choices willbe about how to organize so that both the “domestic” and “foreign” aspects ofinterdependence issues receive their share of attention. For the United States, acentral issue will be how to exercise international leadership without the capabilityfor hegemony. British hegemony over the world’s oceans and monetary systems inthe last century rested on the twin pillars of restraining domestic interests andapplying preponderant power (including an occasional touch of force) abroad.American leadership will encounter the same need to set a good domestic example,but will find the application of power more difficult. We will have to learn both tolive with interdependence and to use it for leadership. From a systemic point ofview, the American paradox may be that the United States has too much ratherthan too little freedom in the short run, and may fail to take the lead on theeconomic and ecological problems that will be increasingly important.

In any case, an appropriate foreign policy for the most powerful state must reston a clear analysis of changing world politics. Outdated or oversimplified models ofthe world lead to inappropriate policies. Our argument in this book is not that thetraditional view of world politics is wrong. We believe that several approaches areneeded, but to different degrees in different situations. We need both traditionalwisdom and new insights. We also need to know how and when to combine them.One of the major problems in understanding world politics is the frequent failure todistinguish among dimensions and areas of the field. This failure is all too oftenaccompanied by a tendency to apply the same simplifications to all aspects of thesubject. We have studied the policy implications of interdependence in order tocontribute to a differentiated, sophisticated approach to analyzing world politics,not to put forward yet another oversimplification as a guide to reality. Carefulanalysis is not a mere academic game. It is essential for coping appropriately with theturbulent world of our time. In battle, the sword is mightier than the pen, but overthe long run, pens guide swords.


209

� CHAPTER 9 POWER, INTERDEPENDENCE, AND THEINFORMATION AGEThe Information Revolution and Complex InterdependenceInformation and PowerThe Paradox of Plenty and the Politics of Credibility

� CHAPTER 10 POWER, INTERDEPENDENCE, AND GLOBALISMGlobalism and InterdependenceContemporary Globalism: What’s New?Globalism and the End of the Cold WarPolitics, Equity, Power, and Governance

Globalism and theInformation Age

VPART


211

Throughout the twentieth century, modernists proclaimed that technologicalchange would dramatically transform world politics. In 1910 Norman Angelldeclared wars to be irrational as a result of economic interdependence, and helooked forward to the day when they would therefore be obsolete.1 Modernists inthe 1970s saw telecommunications and jet travel as creating a “global village,” andbelieved that the territorial state was being eclipsed by nonterritorial actors such asmultinational corporations, transnational social movements, and internationalorganizations. Likewise, prophets of the contemporary information revolution, suchas Peter Drucker, the Tofflers, and Esther Dyson, claim that it is bringing an end tothe hierarchical bureaucratic organization or is creating a new feudalism withoverlapping communities and jurisdictions laying claim to multiple layers ofcitizens’ identities and loyalties.2

The modernists of past generations were partly right. Angell’s understanding of theimpact of war on interdependence was insightful: World War I wrought unprecedenteddestruction, not only on the battlefield but by wrecking the sociopolitical systems andnetworks of economic interdependence that had thrived during the relatively peacefulyears since 1815. As the modernists of the 1970s predicted, multinational corporations,nongovernmental organizations, and global financial markets have indeed becomeimmensely more significant during the last quarter-century. But the state has been moreresilient than modernists have expected. Not only do states continue to command theloyalties of a vast majority of the world’s people; their control over material resources inmost wealthy countries of the OECD, where markets are so important, has stayed at athird to half of gross domestic product (GDP).3

The modernists of 1910 and the 1970s were right about the direction of changebut simplistic about its consequences. Like some contemporary commentators onthe information revolution, they moved too directly from technology to political

Power, Interdependence,and the Information Age*

9CHAPTER

211

*An earlier version of this chapter was published in Foreign Affairs (Sept.–Oct. 1998): 81–94.

212 Chapter 9 Power, Interdependence, and the Information Age

effects, without sufficiently considering the continuity of belief systems, the persist-ence of institutions, or the strategic options available to leaders of states. They failedto analyze how holders of power could wield that power to shape or distort patternsof societal interdependence.

No longer is it sufficient to analyze flows of raw materials, goods, and capitalacross borders, or to understand how states construct territorial boundaries on thehigh seas. Cyberspace is itself a “place”: everywhere and nowhere. But the prophetsof a new cyberworld, like modernists before them, often overlook the fact that ruleswill be necessary to govern cyberspace—not only protecting lawful users fromcriminals but ensuring intellectual property rights. Rules require authority, whetherin the form of public government or private or community governance. Classicissues of politics—who governs, on what terms? who benefits?—are as relevant tocyberspace as to traditionally physical space.

Traditionally, political activity has focused first at the local level, only extending tonational and international spheres as the activity being regulated escaped jurisdictionalboundaries. The contemporary information revolution, however, is inherently global,since “cyberplace” is divided on a nongeographical basis. The suffixes “edu,” “org,” and“com” are not geographical; and even where a country suffix appears in an address,there is no guarantee that the person being reached actually resides in that jurisdiction.

Information is power, as Frances Bacon wrote four hundred years ago.Undoubtedly, the information revolution has profound political implications. Ittherefore makes sense to seek to analyze some of these implications, using toolsdeveloped in studying the politics of interdependence. As traditionalists maintain,much will be the same: states will play important roles; vulnerability will lead tobargaining weakness and lack of vulnerability to power; actors will seek to manipulatecyberspace, as they manipulate flows across borders, to enhance their power. Yet asmodernists insist, the information revolution is not “déjà vu all over again”:cyberspace is truly global; it is harder to stop or even monitor the flow of information-carrying electrons than to do so for raw materials or goods; and dramatic reductions inthe cost of information transmission make other resources relatively scarce.

In 1977 we raised the following question: What are the major features ofworld politics when interdependence, particularly economic interdependence, isextensive? In Chapter 1, our analysis took the interstate system as given and askedhow interstate power relations would be affected by economic interdependence,especially by vulnerabilities produced by such interdependence. Chapter 2 wentfurther, asking about the character of politics in domains where conventionalassumptions about international relations no longer applied. These thoughts ledus to posit an ideal type called complex interdependence with three conditions:(l) a minor role of military force; (2) absence of hierarchy among issues; and(3) multiple channels of contact among societies.

We showed in the following chapters that conditions approximating those ofcomplex interdependence were emerging even in the mid-1970s, among wealthydemocratic states. They affected both interstate relations and the emerging domain oftransnational relations, where nonstate actors played a major role. Yet there remainedgreat variation among regions and across issues. Force was of minor significance in the

The Information Revolution and Complex Interdependence 213

relations between the United States and Canada; and in these relationships issueswere no longer arranged hierarchically. But force remained of crucial significance inthe U.S.–Soviet relationship—as it still does among many states in the Middle East,Africa, and Asia.

In this chapter, we apply the same analytic lens to the contemporary informa-tion revolution. We begin by analyzing different types of information, and how theinformation revolution has altered patterns of complex interdependence. We thenturn to the impact of the information revolution on state power. Finally, we exploresome more novel implications of the information revolution for politics. In particu-lar, we argue that by drastically reducing the costs of transmitting information, theinformation revolution creates a new politics of credibility in which transparencywill increasingly be a power asset.

THE INFORMATION REVOLUTION AND COMPLEX INTERDEPENDENCE

By “information revolution,” we refer to the rapid technological advances incomputers, communications, and software that have led to dramatic decreases in thecost of processing and transmitting information. The price of a new computer hasdropped by 19 percent per year since 1954, and information technologies have risenfrom 7 to about 50 percent of new investment.4 “Moore’s Law,” which has held forthree decades, describes a doubling in the capacity of chips every eighteen months.5

Similarly, growth of the Internet and the World Wide Web has been exponential.The Internet was only opened to the public in 1990. Communications bandwidthsare expanding rapidly, and communications costs continue to fall. As with steam atthe end of the eighteenth century and electricity at the end of the nineteenth, therehave been lags in productivity growth as society learns to utilize the new technolo-gies.6 Although many industries and firms have been undergoing rapid structuralchanges since the 1980s, the economic transformation is far from complete. It isgenerally agreed that we are still in the early stages of the information revolution.7

For our purposes, the distinguishing mark of the information revolution isthe enormous reduction in the cost of transmitting information. For all practicalpurposes, the actual transmission costs have become negligible; hence theamount of information that can be transmitted is effectively infinite—as theproliferation of “spam” on the Internet suggests. Furthermore, neither costs northe time taken to transmit messages are significantly related to distance. AnInternet message to a colleague a few miles away may be routed through thousandsof miles of computer networks; but neither the sender nor the recipient knowsnor cares.

However, the information revolution has not transformed world politics to a newpolitics of complete complex interdependence. One reason is that information doesnot flow in a vacuum, but in political space that is already occupied. States have forthe last four centuries established the political structure within which informationflows across borders and other transactions take place.


The information revolution itself can only be understood within the context ofthe globalization of the world economy, analyzed in Chapter 10 below.Globalization was deliberately fostered by United States policy, and by internationalinstitutions, for half a century after the end of World War II. In the late 1940s theUnited States sought to create an open international economy to forestall anotherdepression and contain communism. The resulting international institutions,formed on the basis of multilateral principles, fostered an environment that put apremium on information and were themselves affected by developments in thetechnologies of transportation and communications. It became increasingly costlyfor states to turn away from the patterns of interdependence that had been created.

The information revolution occurred not merely within a preexisting politicalcontext, but within one characterized by continuing military tensions and conflicts.Although the end of the Cold War removed one set of military-related tensions, itleft some in place (as in the Middle East), and created situations of statebreakingand state-making in which violence was used ruthlessly to attain political ends—notably in Africa, the Caucasus, central Asia, and southeastern Europe. Even in EastAsia, the scene until recently of rapid economic growth, politicalmilitary rivalriespersist. At the same time, the military presence of the United States plays a clearlystabilizing role in East Asia, Central Europe, and—tenuously—the Balkans.Contrary to some early predictions after the end of the Cold War, NATO remainedpopular in Western and Central Europe. Markets thrive only with secure propertyrights, which depend on a political framework—which in turn requires militarysecurity.

Outside the democratic zone of peace, the world of states is not a world of complexinterdependence: in many areas, realist assumptions about the role of military force andthe hierarchy of issues remain valid. However, where the information revolution hashad the most pronounced impact relates to the third assumption, about multiplechannels of contact among societies. Here is the real change. We see an order ofmagnitude shift as a result of the information revolution. Now anyone with a computeris a desktop publisher, and anyone with a modem can communicate with distant partsof the globe at trivial costs. Barriers to entry into the world “information market” havebeen dramatically lowered.

Earlier transnational flows were heavily controlled by large bureaucraticorganizations like multinational corporations or the Catholic Church, with theresources to establish a communication infrastructure. Such organizations remainimportant, but the vast cheapening of information transmission has now opened thefield to loosely structured network organizations, and even individuals. Thesenongovernmental organizations and networks are particularly effective in penetratingstates without regard to borders and using domestic constituencies for agendasetting. By vastly increasing the number of channels of contact among societies, theinformation revolution is changing the extent to which politics is approximatingour model of complex interdependence.

However, information is not like goods or pollution, for which quantitiesflowing across borders are meaningful. The quantity of information available incyberspace means little by itself. Philosophers could debate whether a Web page

The Information Revolution and Complex Interdependence 215

that no one ever looks at really exists; political scientists know that it would not bemeaningful. As many observers have pointed out, the information revolution hasmade attention the scarce resource.8 We used to ask: who has the capacity to trans-mit information? That question has become trivial, since the answer is: everyonewith an Internet hookup. We now must ask: who has the capacity to attract others’attention to the information that he or she transmits? Getting others’ attention is anecessary condition for using information as a political resource.

To focus only on the quantity of information, and on attention, would be to over-look the issue of information quality and distinctions among types of information.Information does not just exist; it is created. We therefore need to pay attention, aseconomists do, to incentives to create information. When we do so, we discover thateach of three different types of information tends to generate a different type of politics:

1. Free information. This is information that actors are willing to acquire and sendwithout financial compensation. The sender gets advantages from the receiverbelieving the information, and hence has incentives to produce it. Scientificinformation falls into this category. So do persuasive messages, such as those inwhich politicians specialize.

2. Commercial information. This is information that actors are willing to acquireand send at a price. Actors neither gain nor lose by others’ believing in theinformation, apart from the compensation they receive. For such information tobe available on the Internet, issues of property rights must be resolved, so thatproducers of information can be compensated for it by users. Creating commer-cial information before one’s competitors can—if there is an effective system toprotect intellectual property rights—creates first-mover advantages andenormous profits, as the history of Microsoft demonstrates.

3. Strategic information. This is information that confers the greatest advantage onactors only if their competitors do not possess it. One way to think of strategicinformation is that it constitutes asymmetrical knowledge of a competitor’sstrategy so that the outcome of a game is altered. There is nothing new aboutstrategic information: it is as old as espionage. One of the enormous advantagespossessed by the United States in World War II was that the United States hadbroken the Japanese codes, but the Japanese were not aware of this fact. Thecapacity to transmit large quantities of strategic information may not be partic-ularly important. For example, the strategic information available to the UnitedStates about the weapons programs of North Korea, Pakistan, or Iraq maydepend more on having reliable spies (even if their messages had to be sentconcealed in a traveler’s shoe) than on the existence of the Internet.

With respect to free information, creators of information benefit from othersbelieving in the information they possess. With respect to commercial information,information-creators benefit if compensated. But with respect to strategic informa-tion, information-creators only benefit if their possession of the information is notknown to others.

The information revolution alters patterns of complex interdependenceby exponentially increasing the number of channels of communication in world


politics—among individuals in networks, not just among individuals within bureau-cracies. But it appears within the context of an existing political structure, and itseffects on the flows of different types of information are highly variable. Freeinformation will flow in the absence of regulation. Strategic information will beprotected as much as possible—for example, by encryption technologies. The flowof commercial information will depend on whether effective rules are established forcyberspace—by governments, business, or nongovernmental organizations—whichprotect property rights. Politics will affect the direction of the informationrevolution as much as vice versa.

INFORMATION AND POWER

Knowledge is power: but what is power? A basic distinction can be made betweenbehavioral power—the ability to obtain outcomes you want—and resource power—the possession of the resources that are usually associated with the ability to get theoutcomes you want. Behavioral power, in turn, can be divided into hard and softpower.9 Hard power is the ability to get others to do what they otherwise would notdo through threat of punishment or promise of reward. Whether by economiccarrots or military sticks, the ability to coax or coerce has long been the centralelement of power. As we pointed out in Chapter 1, asymmetrical interdependence isan important source of hard power. The ability of the less vulnerable to manipulateor escape the constraints of an interdependent relationship at low cost is an impor-tant source of power. In the context of hard power, asymmetries of information cangreatly strengthen the hand of the less vulnerable party.

Soft power, on the other hand, is the ability to get desired outcomes because otherswant what you want; it is the ability to achieve desired outcomes through attractionrather than coercion. It works by convincing others to follow or getting them to agreeto norms and institutions that produce the desired behavior. Soft power can rest on theappeal of one’s ideas or culture or the ability to set the agenda through standards andinstitutions that shape the preferences of others. It depends largely on the persuasive-ness of the free information that an actor seeks to transmit. If a state can make its powerlegitimate in the eyes of others and establish international institutions that encourageothers to define their interests in compatible ways, it may not need to expend as manyof its costly traditional economic or military resources.

Hard and soft power are related, but they are not the same. Samuel P.Huntington is correct when he says that material success makes a culture andideology attractive, and decreases in economic and military success lead to self-doubt and crises of identity.10 He is wrong when he argues that soft power is poweronly when it rests on a foundation of hard power. The soft power of the Vatican didnot wane as the size of the papal states diminished. Canada, Sweden, and theNetherlands tend to have more influence than some other states with equivalenteconomic or military capability. The Soviet Union had considerable soft power inEurope after World War II but squandered it with the invasions of Hungary andCzechoslovakia even at a time when Soviet economic and military power were

Information and Power 217

continuing to grow. Soft power varies over time and different domains. America’spopular culture, with its libertarian and egalitarian currents, dominates film, televi-sion, and electronic communications in the world today. However, not all aspects ofthat culture are attractive to all others, for example conservative Moslems. In thatdomain, American soft power is limited. Nonetheless, the spread of information andAmerican popular culture has generally increased global awareness of and opennessto American ideas and values. To some extent this reflects deliberate policies, butmore often soft power is an inadvertent by-product. For example, companies all overthe world voluntarily subject themselves to the financial disclosure standards of theU.S. Securities and Exchange Commission because of the importance of Americancapital markets.

The information revolution is also affecting power measured in terms ofresources rather than behavior. In the eighteenth century European balance ofpower, territory, population, and agriculture provided the basis for infantry, whichwas a crucial power resource, and France was a principal beneficiary. In thenineteenth century, industrial capacity provided the crucial resources that enabledBritain and, later, Germany to gain dominance. By the mid-twentieth century,science and particularly nuclear physics contributed crucial power resources to theUnited States and the Soviet Union. In this century, information capability broadlydefined is likely to be the most crucial power resource. As Akihiko Tanaka puts it,“word politics” is becoming more important in world politics.11

The new conventional wisdom is that the information revolution has a decen-tralizing and leveling effect. As it reduces costs, economies of scale, and barriers ofentry to markets, it should reduce the power of large states and enhance the powerof small states and nonstate actors. In practice, however, international relations aremore complex than the technological determinism of the new conventional wisdomsuggests. Some aspects of the information revolution help the small, but some helpthe already large and powerful. There are several reasons why. First, importantbarriers to entry and economies of scale remain in some aspects of power that arerelated to information. For example, soft power is strongly affected by the culturalcontent of what is broadcast or appears in movies and television programs. Large,established entertainment industries often enjoy considerable economies of scale incontent production and distribution. The dominant American market share in filmsand television programs in world markets is a case in point.

Second, even where it is now cheap to disseminate existing information, thecollection and production of new information often requires major costlyinvestments. In many competitive situations, it is the newness of information at themargin that counts more than the average cost of all information. Intelligencecollection is a good example. States like America, Britain, and France have capabil-ities for collection and production that dwarf those of other nations. In somecommercial situations, a fast follower can do better than a first mover, but in termsof power among states, it is usually better to be a first mover than a fast follower.

Third, first movers are often the creators of the standards and architecture ofinformation systems. The path dependent development of such systems reflects theadvantage of the first mover. The use of the English language and the pattern of


top-level domain names on the Internet provide relevant examples. Partly becauseof the transformation of the American economy in the 1980s (which was missed ormisunderstood by the prophets of decline) and partly because of large investmentsdriven by the Cold War military competition, the United States was often the firstmover and still enjoys a lead in the application of a wide variety of informationtechnologies.

Fourth, military power remains important in some critical domains of interna-tional relations. Information technology has some effects on the use of force thatbenefit the small and some that favor the already powerful. The off-the-shelfcommercial availability of what used to be costly military technologies benefitssmall states and nonstate actors and contributes to the vulnerability of large states.Information systems add lucrative targets for terrorist (including state-sponsored)groups. Other trends, however, strengthen the already powerful. Many militaryanalysts refer to a “revolution in military affairs” that has been produced by theapplication of information technology.12 Space-based sensors, direct broadcasting,high-speed computers, and complex software provide the ability to gather, sort,process, transfer, and disseminate information about highly complex events thatoccur in wide geographic areas. This dominant battlespace awareness combinedwith precision force provides a powerful advantage. As the 1991 Gulf War showed,traditional assessments of balances of weapons platforms such as tanks or planesbecome irrelevant unless they include the ability to integrate information withthose weapons. Many of the relevant technologies are available in commercialmarkets, and weaker states can be expected to have many of them. The key,however, will not be the possession of fancy hardware or advanced systems, but theability to integrate a system of systems. In this dimension, the United States is likelyto keep its lead, and in terms of information warfare, a small edge makes all thedifference. For instance, in Paul Dibb’s assessment of the future balance of power inEast Asia, he finds that the revolution in military affairs will not diminish, and mayin some instances even increase, the American lead.13

Contrary to the expectations of some theorists, the information revolution hasnot greatly decentralized or equalized power among states. If anything, thus far it hashad the opposite effect. Table 9.1, on the next page, summarizes the effects of the

TABLE 9.1 Effects of Information Technology on Power

Hard power Soft power

Benefitto large actors

• Revolution in military affairs• First mover and architecture• Technical intelligence

collection

• Economies of scale in contentproduction

• Attention scarcity and marketingpower

Benefitto small actors

• Commercial availability• Infrastructure vulnerability• Markets and economic

intelligence

• NGOs and cheap interactivecommunication

• Narrowcasting and new virtualcommunities

The Paradox of Plenty and the Politics of Credibility 219

information revolution on power. But what about reducing the role of governmentsand the power of all states? Here the changes are more likely to be along the linesthe modernists predicted. But to understand these changes, we need first to explorea topic briefly noted earlier: how the information revolution, by minimizingthe costs of transmitting information, has increased the relative significance of thescarce resource of attention, and the implications of this shift for what we call thepolitics of credibility.

THE PARADOX OF PLENTY AND THE POLITICS OF CREDIBILITY

A plenitude of information leads to a poverty of attention. Attention becomes thescarce resource, and those who can distinguish valuable signals from white noisegain power. Editors, filters, and cue-givers become more in demand, and this is asource of power. There will be an imperfect market for evaluators. Brand names andthe ability to bestow an international seal of approval will become more important.

But power does not necessarily flow to those who can withhold information. AsGeorge Akerlof has argued, under some circumstances private information cancripple the credibility of those who have it.14 For instance, sellers of used cars havemore knowledge about their defects than potential buyers. But an awareness of thissituation and the fact that owners of bad cars are more likely to sell than owners ofgood ones lead potential buyers to discount the price they are willing to pay in orderto adjust for unknown defects. Hence the result of the superior information of sellersis not to improve the mean price they receive, but instead to make them unable tosell good used cars for their real value. Unlike asymmetrical interdependence intrade, where power goes to those who can afford to hold back or break trade ties,information power flows to those who can edit and credibly validate information tosort out what is both correct and important.

Hence among editors and cue-givers, credibility is the crucial resource, andasymmetrical credibility is a key source of power. Reputation has always mattered inworld politics, and it becomes even more important because of the “paradox ofplenty.” The low cost of transmitting data means that the ability to transmit it ismuch less important as a power resource than it used to be, but the ability to filterinformation is more so. Political struggles focus less on control over the ability totransmit information than over the creation and destruction of credibility.

One implication of the abundance of information sources, and the role ofcredibility, is that soft power is likely to become less a function simply of materialresources than in the past. When ability to produce and disseminate information isthe scarce resource, limiting factors include the control of printing presses, radiostations, and newsprint. Hard power, for instance using force to take over a radiostation, can generate soft power. In the case of worldwide television, wealth can alsolead to soft power. For instance, CNN was based in Atlanta rather than Amman orCairo because of America’s leading position in the industry. When Iraq invadedKuwait in 1990, the fact that CNN was basically an American company helped to


frame the issue, worldwide, as aggression (analogous to Hitler’s actions in the 1930s)rather than as a justified attempt to reverse colonial humiliation (analogous toIndia’s capture of Goa).

This close connection between hard and soft power is likely to be somewhatweakened under conditions of complex interdependence in an information age.Propaganda is not new. Hitler and Stalin used it effectively in the 1930s.Milosevic’s control of television was crucial to his power in Serbia. In Moscow in1993, a battle for power was fought at a TV station. In Rwanda, Hutu-controlledradio stations contributed to genocide in 1994. The power of broadcasting persistsbut is supplemented by multiple channels of communication, which are controlledby multiple actors that cannot use force to control one another. The issue is notonly which actors own television networks, radio stations, or Web sites oncea plethora of such sources exist, but who pays attention to which fountains ofinformation and misinformation.

Soft power today can also be the legacy of yesterday’s hard and soft power.Britain’s resources over a half-century ago enabled it to construct the BBC, and thenature of British society and politics made the BBC what is has become: a relativelyreliable and unbiased source of information worldwide. The BBC was an importantsoft power resource for Britain in Eastern Europe during the Cold War, as a result ofthe credibility it had established earlier. Now it has more competitors, but to theextent that it maintains credibility in an era of white noise, its value as a powerresource may actually increase.

Broadcasting has long had an impact on public opinion. By focusing on someconflicts and human rights problems, broadcasters have pressed politicians torespond to some foreign conflicts rather than others—e.g., Somalia rather thanSouthern Sudan. Not surprisingly, governments have sought to influence, manipu-late, and control television and radio stations and have been able to do so withconsiderable success, since a relatively small number of physically located broadcast-ing sites were used to reach many people with the same message. However, the shiftfrom broadcasting to narrowcasting has major political implications. Cable and theInternet enable senders to segment and target audiences. Even more important forpolitics is the interactive role of the Internet; it not only focuses attention but facil-itates coordination of action across borders. Interactivity at low cost allows for thedevelopment of new virtual communities: people who imagine themselves as part ofa single group regardless of how far apart they are physically from one another.15

These new technologies create opportunities for nongovernmental actors.Advocacy networks find their potential impact vastly expanded by the informationrevolution, since the fax machine and the Internet enable them to send messagesfrom the most obscure corners of the world: from the oil platforms of the North Seato the forests of Chiapas.16 The 1997 Landmine Conference was a coalition ofnetwork organizations working with middle power governments like Canada andsome individual politicians and celebrities to capture attention and set the agenda.The role of NGOs was also important as a channel of communication acrossdelegations in the global warming discussions. Environmental groups and industrycompeted in Kyoto in 1997 for the attention of the media from major countries,


basing their arguments in part on the findings of nongovernmental scientists. Manyobservers have heralded a new era for NGOs as a result of the information revolu-tion, and there seems little doubt that substantial opportunities exist for a floweringof issue advocacy networks and virtual communities.

Yet the credibility of these networks is fragile. Greenpeace, for instance,imposed large costs on Royal Dutch Shell by criticizing Shell’s planned disposal ofits Brentspar drilling rig. Greenpeace, however, itself lost credibility and member-ship when it later had to admit the inaccuracy of some of its factual claims. Thefindings of atmospheric scientists about climate change have gained credibility, notjust from the prestige of science but from the procedures developed in theIntergovernmental Panel on Climate Change (IPCC) for extensive and carefulpeer review of scientific papers and intergovernmental review of executive sum-maries. The IPCC is an example of an intergovernmental information-legitimatinginstitution, whose major function is to give coherence and credibility to masses ofscientific information about climate change.

As the IPCC example shows, the importance of credibility is giving increasingimportance to what Peter Haas has called “epistemic communities”: transnationalnetworks of like-minded experts.17 By framing issues where knowledge is important,epistemic communities become important actors in forming coalitions and inbargaining processes. By creating knowledge, they can provide the basis for effectivecooperation. But to be effective, the procedures by which this information isproduced have to appear unbiased. It is increasingly recognized that scientific infor-mation is socially constructed; to be credible, the information has to be producedthrough a process that is dominated by professional norms and that appears trans-parent and procedurally fair.18 Even if their information is credible, professionalcommunities will not resolve contentious issues that involve major distributionalcosts. But they will become more significant actors in the politics of decision.

The politics of soft power do not depend only on the “information shapers,”who seek to persuade others to adopt their practices and values. They also dependon the characteristics of their targets: the “information takers,” or the targets ofinformation flows. Of course, the shapers and takers are often the same people,organizations, or countries, in different capacities. Information shapers, as we haveseen, require credibility. The takers, on the other hand, will be differentiallyreceptive depending on the character, and internal legitimacy, of their own institu-tions. Self-confident information takers with internal legitimacy can absorb flows ofinformation more readily, with less disturbance, than can institutions (governmentalor nongovernmental) lacking such legitimacy and self-confidence.

Not all democracies are leaders in the information revolution, but, as far ascountries are concerned, all information shapers are democracies. This is notaccidental. Their societies are familiar with free exchange of information and theirinstitutions of governance are not threatened by it. They can shape informationbecause they can also take it. Authoritarian states, typically among the laggards,have more trouble. At this point, governments such as China’s can control theaccess of their citizens to the Internet by controlling Internet service providers. It ispossible, but costly, to route around such restrictions, and control does not have to


be complete to be effective for political purposes. But as societies like Singaporereach levels of development where their knowledge workers want free access to theNet, they run the risk of losing their scarcest resource for competing in the informationeconomy. Thus Singapore is wrestling with the dilemma of reshaping its educationalsystem to encourage the individual creativity that the information economy willdemand, and at the same time maintain existing social controls over the flow ofinformation. Singapore’s leaders realize they cannot hope to control the Internet inthe long run.19 Closed systems become more costly.

One reason that closed systems become more costly is that it is risky for foreignersto invest funds in a country where the key decisions are made in an opaque fashion.Transparency is becoming a key asset for countries seeking investments. The ability tokeep information from leaving, which once seemed valuable to authoritarian states,undermines the credibility and transparency necessary to attract investment onglobally competitive terms. This point is illustrated by the 1997 Asian financial crisis.Governments that are not transparent are not credible, since the information theyoffer is seen as biased and selective. Moreover, as economic development progressesand middle-class societies develop, repressive measures become more expensive notmerely at home, but also in terms of international reputation. Both Taiwan and SouthKorea discovered in the late 1980s that repression of rising demands for democracywould be expensive in terms of their reputation and soft power. By having begun todemocratize earlier, they have strengthened their capacity—as compared with, forinstance, Indonesia—to cope with economic crisis.

Whatever the future effects of interactivity and virtual communities, onepolitical effect of increased free information flows through multiple channels isalready clear: states have lost much of their control over information about theirown societies. States that seek to develop (with the exception of some energysuppliers) need foreign capital and the technology and organization that go with it.Geographical communities still matter most, but governments that want to see rapiddevelopment will find that they will have to give up some of the barriers to informa-tion flows that protected officials from outside scrutiny. No longer will governmentsthat want high levels of development be able to afford the comfort of keeping theirfinancial and political situations inside a black box. The motto of the globalinformation society might become, “If you can’t take it, you can’t shape it.”

From a business standpoint, the information revolution has vastly increased themarketability and value of commercial information, by reducing costs of transmis-sion and the transaction costs of charging information users. Politically, however,the most important shift concerns free information. The ability to disseminate freeinformation increases the potential for persuasion in world politics—as long ascredibility can be attained and maintained. NGOs and other states can more readilyinfluence the beliefs of people within other jurisdictions. If one actor can persuadeothers to adopt similar values and policies, whether it possesses hard power andstrategic information may become relatively less important. Soft power and freeinformation can, if sufficiently persuasive, change perceptions of self-interest, andtherefore how hard power and strategic information are used. If governments orNGOs are to take advantage of the information revolution, they will have to


establish reputations for credibility in the world of white noise that constitutes theinformation revolution.

In conclusion, the new conventional wisdom is wrong in its predictions of anequalizing effect of the information and communications revolutions in the distribu-tions of power among states. In part, this is because economies of scale and barriers toentry persist in regard to strategic information, and in part because with respect tofree information, the larger states will often be well-placed in the competition forcredibility. On the other hand, the information revolution is altering the degree ofcontrol that all states can exert in today’s world. Cheap flows of information havecreated an order-of-magnitude change in channels of information. Nongovernmentalactors operating transnationally have much greater opportunities to organize and topropagate their views. States are more easily penetrated and less like black boxes. Thecoherence and elite maintenance of hierarchical ordering of foreign policy issues isdiminished.

The net effect of the information revolution is to change political processes in away where soft power becomes more important in relation to hard power than it wasin the past. Credibility becomes a key power resource both for governments andNGOs, giving more open, transparent organizations an advantage with respect tofree information. Although the coherence of government policies may diminish inmore pluralistic and penetrated states, those same countries may be better placed interms of credibility and soft power. And among many states, political processes willcome to more closely approximate the ideal type of complex interdependenceoutlined in Chapter 2. Geographically based states will continue to structure politicsin an information age, but they will rely less on material resources than in the past,and more on their ability to remain credible in a world awash with information. Inthe next chapter, we turn to the implications of this information revolution forglobalization and governance.

224

“The discovery of America, and that of a passage to the East Indies by the Cape of GoodHope, are the two greatest and most important events recorded in the history ofmankind. . . . by uniting, in some measure, the most distant parts of the world. . . .”

Adam Smith, The Wealth of Nations, 1776

“All old-established national industries have been destroyed or are being destroyed. . . . Inplace of the old local and national seclusion and self-sufficiency, we have intercourse inevery direction, universal interdependence of nations.”

Marx and Engels,The Communist Manifesto, 1848

“What an extraordinary episode in the economic progress of man that age was whichcame to an end in August 1914! . . . The [wealthy] inhabitant of London could orderby telephone, sipping his morning tea in bed, the various products of the whole earth,in such quantity as he might see fit, and reasonably expect their early delivery uponhis doorstep; he could at the same moment and by the same means adventure hiswealth in the natural resources and new enterprises of any quarter of the world, andshare, without exertion or even trouble, in their prospective fruits and advantages; . . .[he] could proceed abroad to foreign quarters, without knowledge of their religion, lan-guage, or customs, bearing coined wealth upon his person, and would consider himselfgreatly aggrieved and much surprised at the least interference. But most important ofall, he regarded this state of affairs as normal, certain, and permanent, except in thedirection of further improvement, and any deviation from it as aberrant, scandalousand avoidable.”

John Maynard Keynes,The Economic Consequences of the Peace, 1919

“A global era requires global engagement.”

Kofi Annan,Speech to the United Nations General Assembly, September 1999

Power, Interdependence,and Globalism

10CHAPTER

Globalization and Interdependence 225

Globalization became a buzzword in the 1990s, as “interdependence” did in the1970s, but the phenomena they refer to are not entirely new. What we said aboutinterdependence then—in the second sentence of Chapter 1 of this book—appliesto globalization at the turn of the millennium: “This vague phrase expresses a poorlyunderstood but widespread feeling that the very nature of world politics is changing.”Some skeptics believe such terms are beyond redemption for analytic use. Yet thepublic understands the image of the globe, and the new word conveys an increasedsense of vulnerability to distant causes. For example, as helicopters fumigated New YorkCity in 1999 to eradicate a lethal new virus, the press announced that it might havearrived in the blood of a traveler, a bird smuggled through customs, or in the gut of amosquito that flitted into a jet.1 Fears of “bioinvasion” led some environmental groupsto call for a reduction in global trade and travel.2

Like all popular concepts meant to cover a variety of phenomena, both“interdependence” and “globalization” have many meanings. To understand whatpeople are talking about when they use the terms and to make them useful foranalysis, we have to begin by clarifying concepts. Are interdependence andglobalization simply two words for the same thing? Or is there something new?And if so, what is different about the two concepts?

GLOBALIZATION AND INTERDEPENDENCE

The two words are not exactly parallel. Interdependence refers to a condition, astate of affairs. It can be increasing, as it has been on most dimensions since the endof World War II, or it can decline, as it did, at least in economic terms, during theGreat Depression of the 1930s. Globalization, however, implies that something isincreasing: there is more of it. Yet analysts should not assume that anything—whether the stock market or whatever globalization refers to—only goes up. Henceour definitions start not with globalization but with “globalism,” a condition, orstate of the world, that can increase or decrease.

We define globalism as a state of the world involving networks of interdependenceat multicontinental distances, linked through flows and influences of capital and goods,information and ideas, people and force, as well as environmentally and biologicallyrelevant substances (such as acid rain or pathogens). Globalization and deglobalizationrefer to the increase or decline of globalism.

Globalism involves spatially extensive networks of interdependence. Inter-dependence, as we defined it in Chapter l, “refers to situations characterized by recipro-cal effects among countries or among actors in different countries.”3 Hence globalism isa type of interdependence, but with two special characteristics:

1. Globalism refers to networks of connections (multiple relationships), not simply tosingle linkages. We would refer to economic or military interdependence betweenthe United States and Japan, but not to globalism between the United States andJapan. U.S.–Japanese interdependence is part of contemporary globalism, but byitself is not globalism.

226 Chapter 10 Power, Interdependence, and Globalism

2. For a network of relationships to be considered “global,” it must includemulticontinental distances, not simply regional networks. Distance is of course acontinuous variable, ranging from adjacency (for instance, between the United Statesand Canada) to opposite sides of the globe (for instance, Britain and Australia).Any sharp distinction between “long distance” and “regional” interdependenceis therefore arbitrary, and there is no point in deciding whether intermediaterelationships—say, between Japan and India or between Egypt and South Africa—would qualify. Yet “globalism” would be an odd word for proximate regionalrelationships. Globalization refers to the shrinkage of distance, but on a large scale.It can be contrasted with localization, nationalization, or regionalization.

Some examples may help. Islam’s quite rapid diffusion from Arabia across Asia towhat is now Indonesia was a clear instance of globalization; but the initial movementof Hinduism across the Indian subcontinent was not, according to our definition. Tiesamong the countries of the Asian-Pacific Forum (APEC) qualify as multicontinentalinterdependence, because these countries include the Americas as well as Asia andAustralia; but the Association of Southeast Asian Nations (ASEAN) is regional.

“Globalism” does not imply universality. At the turn of the millennium, aquarter of the American population used the World Wide Web compared to onehundredth of one percent of the population of South Asia. Most people in the worldtoday do not have telephones; hundreds of millions of people live as peasants inremote villages with only slight connections to world markets or the global flow ofideas. Indeed, globalization is accompanied by increasing gaps, in many respects,between the rich and the poor. It does not imply either homogenization or equality.4

Even among rich countries, as Rodrik observes, “there is a lot less globalization thanmeets the eye.”5 An integrated world market would mean free flows of goods,people, and capital, and convergence in interest rates. That is far from the facts.While world trade grew twice as fast and foreign direct investment three times asfast as world output in the second half of the twentieth century, Britain and Franceare only slightly more open to trade (ratio of trade to output) today than in 1913,and Japan is less so. By some measures, capital markets were more integrated at thebeginning of the century, and labor is less mobile than in the second half of thenineteenth century when sixty million people left Europe for new worlds.6 In socialterms, contacts among people with different religious beliefs and other deeply heldvalues have often led to conflict.7 Two symbols express these conflicts: the notion ofthe United States as “the Great Satan,” held by Islamic fundamentalism in Iran; andstudent protestors’ erection in Tiananmen Square in China, in 1989, of a replica ofthe Statue of Liberty. Clearly, in social as well as economic terms, homogenizationdoes not follow necessarily from globalization.

The Dimensions of GlobalismInterdependence and globalism are both multidimensional phenomena. All toooften, they are defined in strictly economic terms, as if the world economy definedglobalism. But other forms of globalism are equally important. The oldest form of


globalization is environmental: climate change has affected the ebb and flow ofhuman populations for millions of years. Migration is a long-standing globalphenomenon. The human species began to leave its place of origin, Africa, about1.25 million years ago and reached the Americas sometime between thirty andthirteen thousand years ago. One of the most important forms of globalization isbiological. The first smallpox epidemic is recorded in Egypt in 1350 B.C. It reachedChina in 49 A.D., Europe after 700, the Americas in 1520, and Australia in 1789.8

The plague or Black Death originated in Asia, but its spread killed a quarter to athird of the population of Europe between 1346 and 1352. When Europeans jour-neyed to the New World in the fifteenth and sixteenth centuries they carriedpathogens that destroyed up to 95 percent of the indigenous population.9 Today,human impact on global climate change could affect the lives of people everywhere.On the other hand, not all effects of environmental globalism are adverse. Forinstance, nutrition and cuisine in the Old World benefited from the importation ofsuch New World crops as the potato, corn, and the tomato.10

Military globalization dates at least from the time of Alexander the Great’s expedi-tions over 2300 years ago, which resulted in an empire that stretched across threecontinents from Athens through Egypt to the Indus. Hardest to pin down, but in someways the most pervasive form of globalism, is the flow of information and ideas. Indeed,Alexander’s conquests were arguably most important for introducing Western thoughtand society, in the form of Hellenism, to the Eastern World.11 Four great religions of theworld—Buddhism, Judaism, Christianity, and Islam—have spread across greatdistances over the last two millennia; and in this age of the Internet other religions suchas Hinduism, formerly more circumscribed geographically, are doing so as well.12

Analytically, we can differentiate different dimensions according to the types offlows and perceptual connections that occur in spatially extensive networks:

1. Economic globalism involves long-distance flows of goods, services, and capital,and the information and perceptions that accompany market exchange. It alsoinvolves the organization of the processes that are linked to these flows: forexample, the organization of low-wage production in Asia for the United Statesand European markets. Indeed, some economists define globalization innarrowly economic terms as “the transfer of technology and capital from high-wage to low-wage countries, and the resulting growth of labor-intensive ThirdWorld exports.”13 Economic flows, markets, and organization as in multina-tional firms, all go together.

2. Military globalism refers to long-distance networks of interdependence inwhich force, and the threat or promise of force, are employed. A good exampleof military globalism is the “balance of terror” between the United States andthe Soviet Union during the Cold War. Their strategic interdependence wasacute and well-recognized. Not only did it produce world-straddling alliances,but either side could have used intercontinental missiles to destroy the otherwithin the space of thirty minutes. It was distinctive not because it was totallynew, but because the scale and speed of the potential conflict arising from inter-dependence were so enormous.


3. Environmental globalism refers to the long-distance transport of materials inthe atmosphere or oceans, or of biological substances such as pathogens orgenetic materials, that affect human health and well-being. Examples includethe depletion of the stratospheric ozone layer as a result of ozone-depletingchemicals; human-induced global warming, insofar as it is occurring; the spreadof the AIDs virus from central Africa around the world beginning at the end ofthe 1970s. As in the other forms of globalism, the transfer of information isimportant, both directly and through the movement of genetic material, andindirectly as a result of inferences made on the basis of material flows. Someenvironmental globalism may be entirely natural—the earth has gone throughperiods of warming and cooling since before the human impact was signifi-cant—but much of the recent change has been induced by human activity.

4. Social and cultural globalism involves movements of ideas, information, andimages, and of people—who of course carry ideas and information with them.Examples include the movement of religions or the diffusion of scientificknowledge. An important facet of social globalism involves imitation of onesociety’s practices and institutions by others: what some sociologists refer to as“isomorphism.”14 Often, however, social globalism has followed military andeconomic globalism. Ideas and information and people follow armies andeconomic flows, and in so doing, transform societies and markets. At its mostprofound level, social globalism affects the consciousness of individuals, andtheir attitudes toward culture, politics, and personal identity. Indeed, socialand cultural globalism interacts with other types of globalism, since military andenvironmental, as well as economic activity convey information and generateideas, which may then flow across geographical and political boundaries. In thecurrent era, as the growth of the Internet reduces costs and globalizes communi-cations, the flow of ideas is increasing at a dramatic rate.

One could imagine other dimensions. For example, political globalism couldrefer to that subset of social globalism that refers to ideas and information aboutpower and governance. It could be measured by imitation effects (e.g., in constitu-tional arrangements or the number of democratic states) or by the diffusion ofgovernment policies, or of international regimes. Legal globalism could refer to thespread of legal practices and institutions to a variety of issues, including world tradeand the criminalization of war crimes by heads of state. Globalization occurs inother dimensions as well—for instance in science, entertainment, fashion, andlanguage. The very word “globalization” has become globalized within the decade!

One obvious problem with considering all these aspects of globalism to bedimensions on a par with those we have listed is that when categories proliferate,they cease to be useful. To avoid such proliferation, therefore, we treat these dimen-sions of globalism as subsets of social and cultural globalism. Political globalismseems less a separate type than an aspect of any of our four dimensions. Almost allforms of globalization have political implications—which is what we, as students ofinternational politics, are most interested in. For example, the World TradeOrganization (WTO), Non-Proliferation Treaty (NPT), Montreal Convention on


Substances Depleting the Ozone Layer, and United Nations Educational, Scientific,and Cultural Organization (UNESCO) are responses to economic, military,environmental, and social globalization, respectively.

In the aftermath of Kosovo and East Timor, ideas about human rights—humanitarianinterventions versus classical state sovereignty formulations—were a central featureof the 1999 session of the United Nations General Assembly. UN Secretary GeneralKofi Annan argued that in a global era, “the collective interest is the national inter-est,” and South African President Thabo Mbeki stated that “the process of global-ization necessarily redefines the concept and practice of national sovereignty.” Onthe other hand, Algerian President Abdelaziz Bouteflika, the head of theOrganization of African Unity, replied that he did not deny the right of Northernpublic opinion to denounce breaches of human rights, but “sovereignty is our finaldefense against the rules of an unequal world.” He complained that “we [Africa] arenot taking part in the decision-making process.”15 These were debates about thepolitical implications of social and military globalization, rather than about politicalglobalization as distinct from its social and military dimensions.

The division of globalism into separate dimensions is inevitably somewhatarbitrary. Nonetheless, it is useful for analysis, because changes in the various dimen-sions of globalization do not necessarily co-vary. One can sensibly say, for instance,that “economic globalization” took place between approximately 1850 and 1914,manifested in imperialism and in increasing trade and capital flows betweenpolitically independent countries; and that such globalization was largely reversedbetween 1914 and 1945. That is, economic globalism rose between 1850 and 1914,and fell between 1914 and 1945. However, military globalism rose to new heightsduring the two world wars, as did many aspects of social globalism. The worldwideinfluenza epidemic of 1919, which took twenty million lives, was propagated by theflows of soldiers around the world.16 So did globalism decline or rise between 1914and 1945? It depends what dimension of globalism one is referring to. Without anadjective, general statements about globalism are often meaningless or misleading.

Thick Globalism: Made in America?When people speak colloquially about globalization, they typically refer to recentincreases in globalism. Comments such as “globalization is fundamentally new,” onlymake sense in this context but are nevertheless misleading. We prefer to speak ofglobalism as a phenomenon with ancient roots, and of globalization as the process ofincreasing globalism, now or in the past.

The issue is not how old globalism is, but rather of how “thin” or “thick” it is atany given time.17 As an example of “thin globalization,” the Silk Road provided aneconomic and cultural link between ancient Europe and Asia, but the route wasplied by a small group of hardy traders, and the goods that were traded back andforth had a direct impact primarily on a small (and relatively elite) stratum ofconsumers along the Road. In contrast, “thick” relations of globalization involvemany relationships that are intensive as well as extensive: long-distance flows thatare large and continuous, affecting the lives of many people. The operations of


global financial markets today, for instance, affect people from Peoria to Penang.“Globalization” is the process by which globalism becomes increasingly thick.

Often, contemporary globalization is equated with Americanization, especiallyby non-Americans who resent American popular culture and the capitalism thataccompanies it. In 1999, for example, some French farmers protecting “culinarysovereignty” attacked McDonald’s restaurants.18 Several dimensions of globalismare indeed dominated today by activities based in the United States, whether onWall Street, in the Pentagon, in Cambridge, in Silicon Valley, or in Hollywood. Ifwe think of the content of globalization being “uploaded” on the Internet, then“downloaded” elsewhere, more of this content is uploaded in the United States thananywhere else.* However, globalization long predates Hollywood and BrettonWoods. The spice trade and the intercontinental spread of Buddhism, Christianity,and Islam preceded by many centuries the discovery of America, much less theformation of the United States; and human migration to North America predatesthe formation of the United States by well over ten thousand years. In fact, theUnited States itself is a product of seventeenth and eighteenth century globaliza-tion. Japan’s importation of German law a century ago, contemporary ties betweenJapan and Latin American countries with significant Japanese-origin populations,and the lending by European banks to emerging markets in East Asia also constituteexamples of globalization not focused on the United States. Hence, globalism is notintrinsically American, even if its current phase is heavily influenced by whathappens in the United States.

Nevertheless, the distinctive qualities of the United States make it uniquelyadapted as a center of globalization. American culture is produced by and gearedtoward a multi-ethnic society whose demographics are constantly altered by immi-gration. It has always been syncretic, borrowing freely from a variety of traditionsand continuously open to the rest of the world. European concern about Americaninfluence, for example, is not new. A number of books were published on the subjecta century ago. This process continues today. The United States is also a great labo-ratory for cultural experimentation, the largest marketplace to test whether a givenfilm or song resonates with one subpopulation or another, or perhaps with people ingeneral. Ideas flow into the United States freely, and flow out with equal ease—often in commercialized form, backed by entrepreneurs drawing on deep pools ofcapital and talent. A Pizza Hut in Asia looks American, though the food, of course,is originally Italian. There seems to be an affinity between opportunities for global-ism, on the one hand, and the characteristics of United States society and market,on the other, even though globalization is not simply Americanization.19

The ideas and information that enter global networks are “downloaded” in thecontext of national politics and local cultures, which act as selective filters andmodifiers of what arrives. McDonald’s in China is organized in a Chinese way, andAmerican movies are dubbed in varying Chinese accents to reflect Chinese perceptions

*Professor Anne-Marie Slaughter of Harvard Law School used the expressions of “uploading” and“downloading” content, at the John F. Kennedy School of Government Visions Project Conference onGlobalization, Bretton Woods, N.H., July 1999.


of the message being delivered.20 Political institutions are often more resistant totransnational transmission than popular culture. Although the Chinese students inTiananmen Square in 1989 built a replica of the Statue of Liberty, China hasemphatically not adopted United States political institutions. Nor is this new. In thenineteenth century, Meiji reformers in Japan were aware of Anglo-American ideasand institutions, but deliberately turned to German models because they seemedmore congenial.21 For many countries today, Canadian constitutional practices,with their greater emphasis on duties, or German laws, restrictive of racially chargedspeech, are more congenial than those of the United States.22

Globalism today is America-centric, in that most of the impetus for the infor-mation revolution comes from the United States, and a large part of the content ofglobal information networks is created in the United States. The central position ofthe United States in these networks creates “soft power”: the ability to get others towant what Americans want.23 But the processes are in many respects reciprocal,rather than one-way. Some U.S. practices are very attractive to other countries—such as honest regulation of drugs, as in the Food and Drug Administration (FDA);and transparent securities laws and practices, limiting self-dealing, monitored by theSecurities and Exchange Commission (SEC). U.S.-made standards are sometimeshard to avoid, as in the rules governing the Internet itself. But other U.S. standardsand practices—from pounds and feet (rather than the metric system) to capitalpunishment, the right to bear arms, and absolute protection of free speech—haveencountered resistance or even incomprehension. “Soft power” is a reality, but itdoes not accrue to the United States in all areas of life, and the United States is notthe only country to possess it.

Connectivity, Sensitivity, VulnerabilityThe economic benefits of exchange have been well understood since Adam Smithand David Ricardo developed classic economic theories of the division of labor andcomparative advantage two hundred years ago. As Smith and Ricardo pointed out,trade enables areas with different factor endowments to specialize in what they arebest at. Movements of people and capital to areas of high marginal returns can alsoenhance productivity. Economic interdependence, as liberals have always empha-sized, can create aggregate benefits. And cosmopolitan ideas, which many of us findattractive, stem from the cross-cultural exchange of information and ideas charac-teristic of social globalism.

However, interdependence—and globalism—can also create costs andconstraints. Economic interdependence requires adjustment, which is often painful.Environmental globalism can mean the transmission of pathogens or harmfulchemicals. Military interdependence can be damaging and costly—between hostileadversaries fearing one another—as well as supportive, as between close allies. Andthe transmission of ideas and information, through migration or cyberspace, can beculturally threatening and disorienting. As a result, interdependence and globalismraise political issues: individuals and groups continue to struggle for advantage andto turn the tides of globalism in their favor.


The political significance of interdependence reminds us that interdependence isnot the same thing as mere interconnectedness. In 1977 we defined interdependencein terms of reciprocal costly effects and declared that “where interactions do not havesignificant costly effects, there is simply interconnectedness,” not interdependence.24

Likewise, we reserve the concept of globalism to spatially extensive networks oftransnational and international interconnectedness that involve costly effects.

By “costly effects,” we mean effects that are consequential. They may reducecosts, or provide benefits, as well as imposing costs. These costs need not beeconomic but may instead involve significant effects on other values, includingmoral standards, aesthetic tastes, personal security, or ecological integrity. Thegeneral point is that costly effects are effects that people care about. These effects, inturn, generate concern—and politics.

For instance, carbon dioxide emissions from power plants in the United Statesand China affect climate on a global basis. China does not direct its carbon dioxideemissions towards the United States—unlike its exports of clothing and toys. Nordoes it directly receive United States carbon dioxide in a reciprocal exchange.However, each country’s carbon dioxide emissions impose costly effects on the othercountry’s climate. Furthermore, social and political networks of interdependencearise in discourses over climate change and negotiations on this subject. Hence theglobalism that develops over the issue of climate change is multidimensional, andinvolves networks of relationships of interdependence, as well as involving acomplex global system characterized by multiple feedback.

Interconnectedness has undoubtedly increased during the last century and ahalf. The Atlantic cable in 1866 reduced the time for communications betweenLondon and New York from about a week to a few minutes—that is, by more than99.9 percent. The steamship, the airplane, the telephone, and jet aircraft progres-sively increased interconnectedness; and since the mid-1980s, new telecommunica-tions technologies—exemplified by the fax machine and especially the Internet—have dramatically reduced costs of communication over long distances. One cannow purchase a telephone that will operate virtually anywhere in the world with thesame telephone number. Furthermore, the costs of storing and sending informationcontinue to fall in half, following Moore’s law on microchip processing power andcost, about every eighteen months. As a result, information processing costs at thetime the third edition of this book was published were roughly one-millionth oftheir level in 1976, when the first edition went to press! Increased connectivity, andits vastly reduced costs, lie at the heart of globalization. Indeed, it is impossible toseparate the current phase of globalization from the information revolution.

Globalism implies interconnectedness, but there is something more. What isthe “more”? To answer this question, the distinction that we made in 1977 betweensensitivity and vulnerability remains relevant. Sensitivity refers to the costly effectsof cross-border flows on societies and governments, within an unchanged frameworkof basic policies. It is one step more than interconnectedness: interconnectednesswith costly effects. It can be caused by real flows, or by perceptions of potentialflows. Economic sensitivity is illustrated by covariation of interest rates amongmajor financial centers; by responses by stocks in New York to stock prices in Asia;


and by the contagion effects of the Thai financial crisis of 1997 on marketselsewhere in Asia. Military sensitivity is reflected in countries’ awareness of threatsto their security. In the Cold War, the bipolar structure of power and the possibilityof mutual assured destruction between the United States and the Soviet Unioncreated a high level of sensitivity. Today military sensitivity can be seen in thepreparations made by countries far from the United States to counter the UnitedStates’ ability to send high-tech nonnuclear weapons to precise spots around theworld, and by the heightened preparations made by the United States to deal withtransnational terrorism. Changes in temperatures in central Africa or sea levels inthe Maldive Islands could reflect environmental sensitivity there to emissions ofcarbon dioxide in industrialized countries, with its effect on climate. Finally, socialsensitivity includes all kinds of effects of the diffusion of ideas, information, andimages, from global fashion to the transnational diffusion of arguments about inter-dependence itself. For example, conservative Islamic regimes wishing to preserve atraditional way of life are highly sensitive to Western music and images.

Vulnerability is another step further in cost. It refers to the costs of adjusting tothe change indexed by sensitivity, by changing one’s own policies. As we put it inChapter 1, “vulnerability can be defined as an actor’s liability to suffer costs imposedby external events even after policies have been altered.” If externally inducedincreases in interest rates lead to adverse effects on economic activity, are effectiveresponses available and if so, how costly would they be? If American popular cultureis anathema to the leaders of China, Singapore, or Iran, can it be filtered out orcounteracted? If so, at what cost? Is there any effective response to U.S. militarypower, or to global warming? If costs of adjustment are substantial, the relationshipgoes beyond sensitivity to vulnerability. “Vulnerability interdependence,” we said,“can be measured only by the costliness of making effective adjustments to achanged environment over a period of time.”25

Both sensitivity and vulnerability interdependence are important aspects ofglobalism. They both rest on interconnectedness, but mere interconnectedness doesnot necessarily imply either sensitivity or vulnerability—witness an illiterate streetvendor in Dacca wearing an American university T-shirt . We may consumeimported luxury goods that we can easily live without or can replace with localalternatives. There are millions of Internet sites to which any of us are potentiallyconnected, but which are irrelevant to us because we pay no attention to them.Most aspects of distant societies of which we are aware have little or no effect on ourattitudes, practices, or well-being. On the other hand, moral concerns may create asocial sensitivity, for example, Iranian mullahs’ reactions to a woman wearinglipstick, or Western reactions to the Taliban’s treatment of women in Afghanistan.

Vulnerability interdependence is particularly important from a politicalstandpoint because it takes into account human agency. Vulnerability can only bedistinguished from sensitivity if there is an actor, or agent, that reacts to a set offlows: only then can one distinguish vulnerability from sensitivity. Furthermore, thelanguage of vulnerability is meant to imply that agents may find their choicesconstrained by interdependence. That is, other agents may be able to manipulatethese constraints and thereby enhance their own power—the ability to get the


outcomes they want—in the relationship. Asymmetrical vulnerability interdepend-ence is an important source of power, as we argued in Chapter 1. Likewise, a form ofglobalism that includes spatially extensive relations of interdependence, implyingvulnerability, has more implications for uneven distributions of global power andautonomy than a form of globalism involving only sensitivity. The significance ofglobalism depends on its effects on agents’ behavior, which will depend in largemeasure on the relative costs of alternative courses of action.26

Illustrating Interdependence and GlobalismThis discussion may become somewhat less abstract if we briefly examine someactual relationships in world politics, in terms of the concepts of interdependenceand globalism. Think of the relationships between Japan and the United States overthe last two centuries. In 1800 interdependence was very low between thesesocieties since interconnectedness was low: they were hardly aware of each other’sexistence and had no regular means of contact. At the middle of the century,Commodore Perry “opened up” Japan by threat of force, and within decades theJapanese were in a hurry to borrow technology and law from the West in order togain wealth and power so Japan could counter Western pressure. Hence by 1900social and economic sensitivity was significant, although it was asymmetrical. Japanresponded to the West—to the point of adopting that quintessential Americansport, baseball—much more than the West responded to Japan, although there isevidence of the latter in the aesthetic realm, especially the fine arts, design, andarchitecture. Military interdependence was still low, but not inconsequential:President Theodore Roosevelt allowed some preferential immigration treatment forJapan over China (whose nationals were excluded from the United States) on thegrounds that Japan was a great power with an effective military, as shown in itsdefeat of Russia in 1905. Environmental interdependence remained minimal, andvirtually unrecognized, except for the North Pacific fur seal treaty of 1911 (to whichRussia and Canada also adhered).27

Until World War I, U.S.–Japanese relations of interdependence could bedescribed largely in bilateral terms: they did not intersect in very important wayswith other relationships. That is, there were few network interconnections betweenrelationships. This began to change with World War I, which accentuated militaryglobalism, of which Japan, as an ally of the Western powers, was an admittedlyperipheral part. Japan sought after the war to be treated as an equal, and in particu-lar to insert clauses about racial equality in the Versailles Treaty, an effort rebuffedby the United States. When the United States banned Japanese immigration in1924, social interdependence between the societies fell. The Washington NavalAgreements of 1921 sought to regulate the new pattern of heightened military inter-dependence, which was reinforced (in a highly conflictual way) when Japan built astrong navy, evading the constraints of the Washington Naval Agreements andchallenging the United States in the western Pacific. Meanwhile, economic inter-dependence was mixed: barriers to the entry of Japanese goods into U.S. marketsreduced both the sensitivity and vulnerability of the economies to one another.


However, Japanese dependence on U.S. supplies of oil and scrap iron made Japanboth sensitive and vulnerable to U.S. economic policies, and the United Statessought to exploit this vulnerability. Interdependence, in other words, varied bothacross and within dimensions.

The Japanese attack at Pearl Harbor, and seizure of southeast Asia, were inpart a response to U.S. embargoes of scrap iron and petroleum, which in turn wereaimed at punishing Japan’s invasion of China and deterring its advance intoSoutheast Asia. In other words, military and economic interdependence werelinked. Japan’s relations with the United States became closely connected with itsrelations with Britain and France, whose possessions it also attacked, and withGermany, Japan’s Axis ally that declared war on the United States the day afterPearl Harbor. At this point, Japan’s involvement in globalism became quite thick:the various networks linking Japan with western countries became linked together.Ironically, Germany’s declaration of war on the United States, prompted by closeGerman-Japanese ties, enabled the Roosevelt administration to globalize its wareffort, rather than focusing on Japan alone.

After World War II, the American occupation of Japan instituted a parliamentaryregime in a country closely allied to the United States. Economic interdependencebetween the two countries increased dramatically, although for the most part itremained asymmetrical. Japan was more sensitive and vulnerable to U.S. actions thanvice versa, as indicated by what Japan called the “Nixon shocks” of 1971—recognizingChina, in effect devaluing the dollar, and imposing import surcharges. However, bythe late 1980s economic interdependence had become somewhat more symmetrical.Japanese banks held huge amounts of U.S. treasury bills and could therefore affectU.S. interest rates, and U.S. high-technology firms depended on imports of compo-nents from Japan, therefore resisting trade sanctions proposed by the government.Meanwhile, military interdependence remained high, but unlike the period before1941, it was highly cooperative, as Japan and the United States remained close allies.Social interdependence lagged somewhat behind, reflecting the great cultural differ-ences between the two countries; but not only did Japan imitate the United States ina variety of ways, or at least try to adapt U.S. practices to Japanese conditions, theUnited States did the same with respect to aspects of business organization, such as“just-in-time” inventory practices.

Perhaps most important, during the postwar period Japanese–U.S. relationswere tightly linked to a variety of other networks and international institutions,constituting quite thick globalism. Japanese trade with the United States wasregulated by the system of the General Agreement on Tariffs and Trade (GATT);the United States sponsored the admission of Japan to GATT in 1955 and pressuredthe Europeans to open their markets to Japanese goods. Japan became a majorcontributor to international financial institutions, including the InternationalMonetary Fund (IMF), the World Bank, and the Asian Development Bank.Militarily, the U.S. alliance with Japan became an integral part of U.S. global militaryplanning, and the military interdependence helped to mitigate the frictions thatarose in the trade relations between the two countries in the 1990s. More broadly,Japan became part of the U.S.–centered security community, so global relations of


complex interdependence came to characterize its relationships with the United Statesand western Europe. Interdependence developed along several dimensions. Forexample, management of the dollar as a reserve currency involved relations withboth the yen and the Euro. The Japanese–U.S. relationship could not be understoodmerely as one of bilateral interdependence, but as part of a pattern of globalisminvolving many such relationships, along many dimensions, and the connectionsamong them.

CONTEMPORARY GLOBALISM: WHAT’S NEW?

So far, we have emphasized continuities between interdependence and globalism.Many of our concepts from 1977, such as the distinction between sensitivity andvulnerability, remain relevant today. “Globalization” is a catchy word and certainlyreflects increases in the intensivity and extensivity of interdependence—in its“thickness.” Globalism today is different from the nineteenth century whenEuropean imperialism provided much of its political structure, and higher transportand communications costs meant fewer people were directly involved. But is thereanything about globalism today that is fundamentally different from 1977? To saythat something is “fundamentally” different is always problematic, since absolutediscontinuities do not exist in human history. Every era builds on others, andhistorians can always find precursors in the past for phenomena of the present. Allthree are closely related to the information revolution. Thomas Friedman arguesthat contemporary globalization goes “farther, faster, cheaper and deeper.”28 Webelieve that the degree of thickening of globalism may be giving rise to threechanges not just in degree but in kind: (1) increased density of networks;(2) increased “institutional velocity”; and (3) increased transnational participation.

Density of NetworksEconomists use the term “network effects” to refer to situations where a productbecomes more valuable once many other people also use it. This is why the Internetis causing such rapid change.29 Joseph Stiglitz, Chief Economist of the World Bank,argues that a knowledge-based economy generates “powerful spillover effects, oftenspreading like fire and triggering further innovation and setting off chain reactionsof new inventions . . . But goods—as opposed to knowledge—do not always spreadlike fire. . . .”30 Moreover, as interdependence and globalism have become thicker,the systemic relationships among different networks have become more important.There are more interconnections among the networks. As a result, “system effects”31

become more important. Intensive economic interdependence affects social andenvironmental interdependence, and awareness of these connections in turn affectseconomic relationships. For instance, the expansion of trade can generate industrialactivity in countries with low environmental standards, mobilizing environmentalactivists to carry their message to the newly industrializing but environmentally laxcountries. The resulting activities may affect environmental interdependence

Contemporary Globalism: What’s New? 237

(for instance, by reducing cross-boundary pollution) but may generate resentment inthe newly industrializing country, affecting social and economic relations.

The extensivity of globalism means that the potential connections occurworldwide, with sometimes unpredictable results. Even if we thoroughly analyzedeach individual strand of interdependence between two societies, we might wellmiss the synergistic effects of relationships between these inter-society linkages.

Environmental globalism illustrates the point well. When scientists in theUnited States discovered chlorofluorocarbons (CFCs) in the 1920s, CFCs seemed toexemplify the “miracle of modern chemistry.” They were efficient refrigerants butalso chemically inert, hence not subject to explosions and fires. Only in the 1970swas it suspected, and in the 1980s proved, that CFCs depleted the stratospheric ozonelayer, which protects human beings against harmful ultraviolet rays. Theenvironmental motto, “everything is connected to everything else,” warns us thatthere may be unanticipated effects of many human activities, from burning of carbonfuels (generating climate change) to genetically modifying crops grown for food.

Environmental globalism has political, economic, and social consequences.Discoveries of the ozone-depleting properties of CFCs (and other chemicals) led tothis issue being put on international agendas; to intranational, international, andtransnational controversies about it; and eventually to a series of internationalagreements, beginning at Montreal in 1987, regulating the production and sale ofsuch substances. These agreements entailed trade sanctions against violators—thusaffecting economic globalism. They also raised people’s awareness of ecologicaldangers, contributing to much greater transnational transmission of ideas and infor-mation (social globalism) about ecological processes affecting human beings.

Another illustration of network interconnections is provided by the impact,worldwide, of the financial crisis that began in Thailand in July 1997.Unexpectedly, what appeared first as an isolated banking and currency crisis in asmall “emerging market” country had severe global effects. It generated financialpanic elsewhere in Asia, particularly in Korea and Indonesia; prompted emergencymeetings at the highest level of world finance and huge “bail-out” packages orches-trated by the IMF; and led eventually to a widespread loss of confidence in emergingmarkets and the efficacy of international financial institutions. Before that conta-gious loss of confidence was stemmed, Russia had defaulted on its debt (in August1998), and a huge U.S.–based hedge fund, Long-Term Capital Management, had tobe rescued suddenly through a plan put together by the U.S. Federal Reserve. Evenafter recovery had begun, Brazil required a huge IMF loan, coupled with devalua-tion, to avoid financial collapse in January 1999.

The relative magnitude of foreign investment in 1997 was not unprecedented.Capital markets were by some measures more integrated at the beginning than atthe end of the twentieth century. The net outflow of capital from Britain in the fourdecades before 1914 averaged five percent of gross domestic product, compared totwo to three percent for rich countries today.32 The fact that the financial crisis of1997 was global in scale also had precursors: “Black Monday” on Wall Street in 1929and the collapse of Austria’s Creditanstalt bank in 1931 triggered a worldwide finan-cial crisis and depression. (Once again, globalism is not new.) Financial linkages


among major financial centers have always been subject to the spread of crisis, aswithdrawals from banks in one locale precipitate withdrawals elsewhere, as failuresof banks in one jurisdiction lead to failures even of distant creditors.

Even though the 1997–99 crisis had earlier precursors, its scope was remarkable:Thailand, Indonesia, Russia, and Brazil were all seriously affected. Furthermore, thecrisis did not only afflict countries with overtly expansionary macroeconomicpolicies. On the contrary, even countries whose underlying positions seemedconsistent with their exchange rate pegs, such as Hong Kong and Taiwan, werevictims of speculative attacks “triggered by a sudden and unpredictable shift inmarket expectations.”33 This process was dubbed “contagion.” As a result of thiscontagion, the crisis was almost totally unanticipated by economists, governments,and international financial institutions. Indeed, the World Bank had recentlypublished a report entitled “The Asian Miracle” (1993); investment flows to Asiahad risen rapidly to a new peak in 1996 and remained high until the crisis hit.Reflecting on the suddenness and unexpectedness of the crisis, Federal ReserveBoard chairman Alan Greenspan commented: “I have learned more about how thisnew international financial system works in the last twelve months than in theprevious twenty years.”34 As Held, et al., argue, sheer magnitude, complexity, andspeed distinguish contemporary globalization from earlier periods.35

There are also interconnections with military globalism. In the context ofsuperpower bipolarity, the end of the Cold War represented military deglobalization.Distant disputes became less relevant to the balance of power. But the rise of socialglobalization had the opposite effect. Humanitarian concerns interacting withglobal communications led to dramatization of some conflicts and military interven-tions in places like Somalia, Bosnia, and Kosovo. At the same time, other remoteconflicts such as Southern Sudan, which proved less accessible, were largely ignored.At the tactical level, the asymmetry of global military power and the interconnec-tions among networks raises new options for warfare. For example, in devising astrategy to stand up to the United States, some Chinese officers are proposingterrorism, drug trafficking, environmental degradation, and computer virus propaga-tion. They argue that the more complicated the combination—for example,terrorism plus a media war plus a financial war—the better the results. “From thatperspective, ‘Unrestricted War’ marries the Chinese classic The Art of War by SunTzu, with modern military technology and economic globalization.”36

The general point is that the increasing thickness of globalism—the density ofnetworks of interdependence—is not just a difference in degree from the 1970s.Thickness means that different relationships of interdependence intersect moredeeply at more different points. Hence, effects of events in one geographical area, onone dimension, can have profound effects in other geographical areas, on otherdimensions. As in scientific theories of “chaos,” and in weather systems, small eventsin one place can have catalytic effects, so that their consequences later, and else-where, are vast.37 Such systems are very difficult to understand, and their effects aretherefore often unpredictable. Furthermore, when these are human systems, humanbeings are often hard at work trying to outwit others, to gain an economic, social, ormilitary advantage precisely by acting in an unpredictable way. As a result, we should


expect that globalism will be accompanied by pervasive uncertainty. There will be acontinual competition between increased complexity and uncertainty, on the onehand, and efforts by governments, market participants, and others to comprehendand manage these increasingly complex interconnected systems.

Globalization, therefore, does not merely affect governance; it will be affectedby it. Frequent financial crises of the magnitude of the crisis of 1997–99 could leadto popular movements to limit interdependence, and to a reversal of economicglobalization. Chaotic uncertainty is too high a price for most people to pay forsomewhat higher average levels of prosperity. Unless some aspects of globalizationcan be effectively governed, it may not be sustainable in its current form.

Reduced Communications Costs and Institutional VelocityWe have defined globalization as the thickening of globalism. In recent years, thisglobalization has involved increasingly dense network interconnections, distin-guishing it from earlier periods of thickened globalism.

As we have emphasized in Chapter 9, dramatic advances in informationprocessing and telecommunications technologies constitute a fundamental sourceof contemporary globalization. The “information revolution” is at the heart ofeconomic and social globalization. It has made possible the transnational organiza-tion of work and the expansion of markets, and therefore facilitated a new interna-tional division of labor. As Adam Smith famously declared in The Wealth ofNations, “The division of labor is limited by the extent of the market.”38 Militaryglobalism predated the information revolution, reaching its height in World War IIand during the Cold War; but the nature of military interdependence has beentransformed by information technology. The pollution that has contributed toenvironmental globalism has its sources in the coal-oil-steel-autos-chemicals econ-omy that was largely created between the middle of the nineteenth and twentiethcenturies and has become globalized recently; but the information revolution mayhelp to counter and reverse the negative effects of this form of globalism.

Sometimes these changes are viewed in terms of the velocity of informationflow, but this characterization is incorrect. The biggest change in velocity came withthe steamship and especially the telegraph: as we have noted, the Atlantic cable of1866 reduced the time of transmission of information between London andNew York by over a week—hence by a factor of about a thousand. The telephone, bycontrast, perhaps increased the velocity of such messages by a few minutes (sincetelephone messages do not require decoding), and the Internet, as compared to thetelephone, not much at all.

The real difference lies in the reduced cost of communicating, not in thevelocity of any individual communication. And the effects are therefore felt inincreased intensity rather than extensity of globalism. In 1877 it was expensive tosend telegrams across the Atlantic, and in 1927 or even 1977 it was expensive to tele-phone transcontinentally. Corporations and the rich used transcontinentaltelephones, but ordinary people wrote letters unless there was an emergency. But in1999 the Internet was virtually free at the margin and transpacific telephone calls


may cost only a few cents per minute. Hence the volume of communications hasincreased by many orders of magnitude, and the intensity of globalism has been ableto expand exponentially.

Markets react more quickly than before, since information diffuses so muchmore rapidly and huge sums of capital can respond at a moment’s notice.Multinational enterprises have changed their organizational structures, integratingproduction more closely on a transnational basis, and entering into more networksand alliances, as global capitalism has become more competitive and more subject torapid change. Nongovernmental organizations (NGOs) have vastly expanded theirlevels of activity.

With respect to globalism and velocity, therefore, it seems worthwhile to makea distinction between the velocity of a given communication—”messagevelocity”—and what we would call “institutional velocity.” Message velocity has notchanged very significantly, for the population centers of relatively rich countries,since the telegraph became more or less universal toward the end of the nineteenthcentury. But institutional velocity—how rapidly a system and the units within itchange—is a function not so much of message velocity than of the intensity ofcontact—the “thickness” of globalism. For instance, individual news items do nottravel much faster from Sarajevo to New York than they did in 1914; but theinstitutions and economics of cable television and the Internet have made “newscycles” shorter and have put a larger premium on small advantages in speed. In1914, one newspaper did not normally “scoop” another by receiving and processinginformation an hour earlier than another: as long as the information could beprocessed before the daily paper “went to bed,” it was timely. But in 1999, an hour—or even a few minutes—makes a critical difference for a cable television networkbetween being “on top of a story” or “behind the curve.” Institutional velocity hasaccelerated more than message velocity. Institutional velocity reflects not onlyindividual linkages but networks and interconnections among networks. As we haveemphasized above, here is where the real change lies.

Transnational Participation and Complex InterdependenceThe third new aspect is the way that reduced costs of communications have increasedthe number and participation of actors and increased the relevance of “complexinterdependence.” As explained in Chapter 2, complex interdependence is an idealtype, describing a hypothetical world with three characteristics: (1) multiplechannels between societies, with multiple actors, not just states; (2) multiple issues,not arranged in any clear hierarchy; and (3) the irrelevance of the threat or use offorce among states linked by complex interdependence. When we developed theconcept of complex interdependence in the 1970s, we argued that it characterizedonly part of world politics. Manifestly it did not characterize relations between theUnited States and the Soviet Union, nor did it characterize the politics of the MiddleEast, East Asia, Africa, or even parts of Latin America. However, we did argue thatinternational monetary and oceans relations approximated some aspects of complexinterdependence in the 1970s and that some bilateral relationships—we identified


France-Germany and the U.S.–Canada—approximated all three of the conditions ofcomplex interdependence. In a world of complex interdependence, we argued,politics would be different. The goals and instruments of state policy, and processes ofagenda-setting and issue-linkage, would all be different, as would the significance ofinternational organizations.

Translated into the language of globalism, the politics of complex interdependencewould be one in which economic, environmental, and social globalism are high, andmilitary globalism low. Arguably, intercontinental complex interdependence waslimited during the Cold War to areas protected by the United States such as theAtlantic “security community.”39 Indeed, United States power and policy were crucial,after World War II, to the construction of the international institutions, rangingfrom NATO to the IMF and GATT, that protected and supported complexinterdependence. Since 1989 the decline of military globalism and the extension ofsocial and economic globalism to the former Soviet empire have implied the expansionof areas of complex interdependence, at least to the new and some aspiring members ofNATO in eastern Europe. Economic and social globalism seem to have createdincentives also for leaders in South America to settle territorial quarrels, for fear both ofbeing distracted from tasks of economic and social development and of scaring awayneeded investment capital.

Even today complex interdependence is far from universal. Military force wasused by or threatened against states during the 1990s from the Taiwan Strait to Iraq,Kuwait to the former Yugoslavia, Kashmir to Congo. Civil wars are endemic inmuch of sub-Saharan Africa and sometimes have spilled over into internationalwarfare, as the Rwanda civil war spread to Congo. The information revolution andthe voracious appetite of television for dramatic visual images have heightenedglobal awareness of some of these civil conflicts and made them more immediate,contributing to pressure for humanitarian intervention, as in Bosnia and Kosovo.The various dimensions of globalization—in this case, the social and militarydimensions—intersect, but the result is not necessarily conducive to greaterharmony. Nevertheless, interstate use and threat of military force have virtuallydisappeared in relations in certain areas of the world—notably among the advanced,information-era democracies bordering the Atlantic and the Pacific, and among anumber of their less wealthy neighbors in Latin America and increasingly ineast-central Europe.

As we pointed out in Chapter 9, the dimension of complex interdependencethat has changed the most since 1977 is participation in channels of contact amongsocieties. There has been a vast expansion of such channels as a direct result of thedramatic fall in the costs of communication over large distances. It is no longernecessary to be a rich organization to be able to communicate on a real-time basiswith people around the globe. Friedman calls this change the “democratization” oftechnology, finance, and information, because diminished costs have made whatwere previous luxuries available to a much broader range of society.40 In 1919, JohnMaynard Keynes observed that “an inhabitant of London could order by telephone,sipping his morning tea in bed, the various products of the whole earth. . . .”However, this inhabitant had to be rich.41 Today, in most developed countries an


even greater array is available to the average citizen at the local supermarket or overthe Internet. “Democratization” is probably the wrong word, however, since inmarkets, money votes and people start out with unequal stakes. There is no equality,for example, in capital markets, despite the new financial instruments that permitmore people to participate. “Pluralization” might be a better word, suggesting thevast increase in the number and variety of participants in global networks.Nongovernmental organizations—whether large ones such as Greenpeace orAmnesty International, or the proverbial “three kooks with a fax machine”—cannow raise their voices, worldwide, as never before. Whether they establish thecredibility to get and hold anyone’s attention, as we observe in Chapter 9, hasbecome the key political question.

This vast expansion of transnational channels of contact, at multicontinentaldistances, generated by the media and a profusion of nongovernmental organiza-tions has helped to expand the third dimension of complex interdependence: themultiple issues connecting societies. More and more issues are up for grabs interna-tionally, including regulations and practices—ranging from pharmaceutical testingto accounting and product standards to banking regulation—that were formerlyregarded as the prerogatives of national governments. The Uruguay round of tradenegotiations of the late 1980s and early 1990s focused on services, formerly virtuallyuntouched by international regimes; and the financial crisis of July 1997 to January1999 led to both public and private efforts to globalize the transparent financialreporting that has become prevalent in advanced industrialized countries.

Increased participation at a distance and greater approximation of complexinterdependence does not imply the end of politics. On the contrary, power remainsimportant. Even in domains characterized by complex interdependence, politicsreflects asymmetrical economic, social, and environmental interdependence, notjust among states but also among non-state actors and through transgovernmentalrelations. It is important to remember that complex interdependence is not adescription of the world but rather an “ideal type,” abstracting from reality. It is,however, an ideal type that increasingly corresponds to reality in many parts of theworld, even at transcontinental distances—and that corresponds more closely thanobsolete images of world politics as simply those relations among states that revolvearound force and security.

Is Distance Becoming Irrelevant?Recognizing fundamental change is sometimes easier than seeing its limits, orvariations. In 1977 we called people who saw the changes but not the continuities“modernists,” in contrast to traditional realists. Perhaps today we should refer tothem as “postmodernists.” At any rate, there is a tendency among thesemodernists or postmodernists to believe that communication costs have erased thesignificance of distance. In some domains, this is true; but as a generalization, it isa half-truth. First, participation in global interdependence has increased, butmany people of the world are only tenuously connected to any communicationsnetworks that transcend their states, or even their localities. Most people in the


world, as we have noted, do not own telephones, and many peasant villages inAsia, Africa, and Latin America are only linked to the world as a whole throughslow and often thin economic, social, and political links. Furthermore, even forthose people tied closely into global communications networks, it is more accurateto say that the significance of distance has come to vary greatly by issue-area—that is, according to the specific type of flow involved, even within each of ourfour main dimensions. That is, if globalization implies the shrinking of distance,those distances have shrunk at different rates for different sets of people and indifferent issue-areas.42

For instance, economic globalization has been most marked in financialmarkets. Distance is indeed irrelevant—except for time zones—if a stock can be soldinstantaneously in New York or Hong Kong by an investor in Abijan to one inMoscow. Indeed, if the stock is sold on-line, in cyberspace, it may be only a fictionthat it was “sold on the New York Stock Exchange.” But physical goods move moreslowly than capital, since automobiles and cut flowers cannot be transformed intodigits on a computer. Orders for them can be sent without regard to distance, but thecars or flowers have to move physically from Japan or Columbia to Jakarta orCalgary. Such movement is faster than it once was—flowers are now sent thousandsof miles by jet aircraft—but is by no means instantaneous or costless. Even moreconstrained by distance are personal services: people who desire haircuts or faceliftscannot get them on-line!

Variability by distance applies to other dimensions of globalism as well. Theactual movement of ideas and information is virtually instantaneous, but theircomprehension and acceptance depends on how different the assumptions,attitudes, and expectations of different groups of people are. We can refer to thesedifferences as “cultural distance,” which has been shaped by past migrations ofpeople and ideas, in turn constrained by geography. The American president cantalk simultaneously to people in Berlin, Belgrade, Buenos Aires, Beijing, Beirut,Bombay, and Bujumbura—but the same words will be interpreted very differently inthese seven cities. Likewise, American popular culture may be interpreted by youthin some cultures as validating fundamentally new values and lifestyles, but viewed inother settings merely as essentially trivial symbols, expressed only in baseball caps,T-shirts, and music. And for some youth in the same city, such as Teheran, thesymbols are either the sign of the Great Satan, or of liberation. Cultural distancesresist homogenization. Finally, elements of social globalism that rely on themigration of people are highly constrained by distance and by legal jurisdictions,since travel remains costly for most people in the world and governmentseverywhere seek to control and limit migration.

In the environmental realm, similar variability by distance occurs. We may liveon “only one earth,” but pollution of rivers directly affects only those downstream,and the poisonous air of many cities in the former Soviet empire and developingcountries is lethal mostly to people within local and regional basins. The most lethalpollution is local. On the other hand, depletion of the ozone layer and globalwarming are genuinely global phenomena, although even these phenomena are notuniform but vary by latitude and climatic factors.


There is also great variability by distance in military globalism. Only a fewcountries have intercontinental missiles, and only the United States has the logisti-cal, command, and control capabilities for global reach with conventional forces.Most countries are local or at best regional powers. The most lethal instruments inthe worst case of genocide since the Holocaust were machetes in Rwanda in 1994.At the same time, weak local actors can use other networks of globalism to wreakdamage. Even nonstate actors can do so, as witnessed when a transnational terroristgroup bombed the World Trade Center in New York.

So what really is new in contemporary globalism? Intensive, or thick, networkinterconnections that have systemic effects, often unanticipated. But such “thickglobalism” is not uniform: it varies by region and locality and by issue-area. It is lessa matter of communications message velocity than of cost, which does speed upwhat we have called systemic and institutional velocity. Globalization shrinksdistance, but distance has not become irrelevant. And the filters provided by domes-tic politics and political institutions play a major role in determining what effectsglobalization really has, and how effectively various countries adapt to it. Finally,reduced costs have enabled more actors to participate in world politics at greaterdistances, and this has led larger areas of world politics to approximate the ideal typeof complex interdependence.

GLOBALIZATION AND THE END OF THE COLD WAR

Although the information revolution has added these new dimensions, it is notthe only cause of the contemporary epoch of globalization. Also important werethe political events that have shaped and extended globalization: Americanpolicy after 1945, the fragmentation of the Soviet empire in 1989, and thecollapse of the Soviet Union itself in 1991. To see how the end of the Cold Waraffected interdependence and globalization, we look at how it affected our fourmajor dimensions of globalism, identified earlier by types of flow or perceptionsof potential flow.

The End of the Cold War and the Dimensions of GlobalismAlong the economic dimension, the most profound effect of the end of the ColdWar was to further legitimize capitalism as an economic system. Marketization—theresurgence in the use of markets—had begun in Thatcher’s Britain and Reagan’sUnited States well before the weakness and slowness of the Soviet central planningsystem was fully understood. Socialism had challenged capitalism on bothnormative grounds—its generation of inequality, in particular—and as a productivesystem. Indeed, when Nikita Khrushchev told Richard Nixon in 1959, “we will buryyou,” he was making an economic prediction of the triumph of Soviet socialism overcapitalism, not a military threat. He did not dream that socialism would collapse inthe Soviet Union and around the world, nor that in July 1999 his own son wouldtake an oath of United States citizenship!

Globalization and the End of the Cold War 245

The collapse of the Soviet Union was itself a blow to Marxist beliefs, butperhaps even more devastating were the revelations that the Soviet economy hadbeen both weaker and more corrupt and inegalitarian than even its adversaries hadbelieved. The U.S.S.R. was hopelessly behind in information technology, with thegap growing wider all the time. In 1984, when Gorbachev came to power, there wereonly fifty thousand personal computers in the Soviet Union, compared with thirtymillion in the United States. Four years later, Gorbachev’s reforms had quadrupledthe number of computers, but at the same time the United States number had grownto forty million.43 Even the Soviet military, which was consuming nearly a quarter ofGNP, began to despair about keeping up.

More concretely, the end of the Cold War extended the geographic domainof capitalism, which had largely been excluded from the U.S.S.R. and muchof eastern Europe (and until the late 1970s, from China as well). This process ofgeographical extension of global capitalism was already underway, as a result ofthe liberal economic institutions created after 1945, and the failure by the early1980s of import-substituting industrialization—a form of national capitalismwith substantial state participation—in countries such as Brazil and India. Thecombination of the failure of import substitution, the discrediting of statesocialism, and the absence of a powerful bloc promoting socialist ideas, allcontributed to rapid increases in the integration of formerly protected regionsinto global capitalism.

These economic effects of the end of the Cold War were accompanied by socialchanges as well. Liberalism seemed to have triumphed—not merely capitalism butdemocracy and the rule of law, as represented in the West, and particularly in theUnited States. Francis Fukuyama oversimplified the result in calling it the end ofhistory, but he was correct that after 1989, there was no single opposition to liberalcapitalism.44 Instead there are many particularistic communal reactions. Economicglobalization may accentuate some of the reactions, but it has not produced anoverarching common ideology in the way that the industrial revolution producedfascism and communism. Anti-Americanism as a response to globalization is far lesscoherent.

We have noted above that although globalism predates the United States,contemporary globalism is heavily Americanized. Nowhere is this more true than inthe impact of United States popular culture around the world. We also find othercountries imitating United States institutions—such as universities, regulatoryorganizations such as the Securities and Exchange Commission, and market-friendlygovernmental policies. In part this is a result of fashion and marketing, in partbecause a number of the institutions have proven effective. Yet as noted above, notall social networks emanate from the United States. Francophone Africa still looks toParis, and Berlin has a strong impact on Eastern Europe. The United States is not theonly model—but it is often the first model, the first place others look for institutionsto imitate. No longer does it have to compete with a power of apparently equalsize and success.

Here again, other forces than the end of the Cold War are at work. By coinci-dence, the collapse of the Soviet Union coincided with the beginning of Japan’s


steep recession after 1991–92. The notion that Japan could be “number one,” whichhad been prominent in some literature of the 1980s, now looks anachronistic.45

Europe was uniting but neither its societies nor its economies were dynamic. Almostby default, America had no rival in the competition for pre-eminence in people’sconsciousness of what human society could become. The character of socialglobalism thus became highly Americanized.

The end of the Cold War did not increase environmental globalism; indeed,by leading to a drastic reduction of Russian and East European industrial produc-tion (which had been highly energy-intensive and polluting), it somewhatreduced ecological damage emanating from the area formerly controlled by theU.S.S.R. The main result of the end of the Cold War that relates to environmen-tal globalism was actually more social than environmental: it further discreditedstate socialism. The Soviet collapse was followed by a succession of revelations ofenvironmental disasters, whether deliberate (resulting from germ warfare experi-ments, the dumping of nuclear materials at sea, or falsification of acid-rain data)or inadvertent.

The end of the Cold War did not accelerate military globalism but transformedit. The old globalism, based on U.S.–Soviet rivalry, disappeared. Russia does nothave the capacity to intervene in distant places such as Nicaragua or Angola. TheUnited States no longer cares as much about distant countries such as Angola andAfghanistan, in the absence of a Soviet threat, though humanitarian concerns andthe asymmetrical military capabilities discussed earlier mean that some militaryglobalism persists. The end of the Cold War has combined with technologicalchange to create another form of military globalism dominated by the UnitedStates. During the Cold War, even with great effort, the Soviet Union was fallingbehind in military technology, as its failure to respond to Reagan’s Strategic DefenseInitiative indicated. Indeed, except for its nuclear weapons the vaunted Russianmilitary seemed by 1994 to be a “paper tiger,” as the decay of its military infrastruc-ture suggested. This collapse of Soviet nonnuclear military power has led to a lack ofeffective resistance from Russia to United States military actions, which in turn haspermitted the United States and its allies to use military force for humanitarian orother reasons in Iraq and Bosnia, and against Serbia.

Conjunctural Politics and the Americanization of GlobalismHistory does not proceed in a linear way, but often takes its form because ofconjunctures between causally unconnected events. The dynamism of the sixteenthcentury reflected both the impact of voyages of discovery (made possible by techno-logical changes in shipping and navigation) and of the Reformation, with its effectson religion, society, and economy.46 The Industrial Revolution produced highexplosives, poison gas, and the jet aircraft, making warfare more deadly for civilians;but only the conjunction between these developments and racism created WorldWar II and the Holocaust.

Contemporary globalization also reflects conjunctures, which—it is to bedevoutly hoped—will be more benign. Along the economic dimension, the end of

Politics, Equity, Power, and Governance 247

the Cold War, with the effects discussed above, coincided with the exhaustion ofimport substitution and the state control model of industrialization. Even moreprofoundly, the information revolution, along with similar developments inbiotechnology, created opportunities for new entrepreneurship that put a premiumon technical intelligence and rapid adaptation to new situations. Two sets of institu-tional arrangements suddenly assumed greater importance in the 1990s: close linksbetween research laboratories and market-oriented enterprises, on the one hand,and deep capital markets, with many agents willing to take risks, on the other. TheUnited States had both, surpassing Europe and Japan.

The science-market linkages were already in existence in areas where universi-ties and innovative firms were in synergistic relationships to one another, as in theSilicon Valley of California (Stanford University), Cambridge, Massachusetts(Harvard and MIT), and North Carolina’s Research Triangle Park (Duke, theUniversity of North Carolina, and North Carolina State University). Successfulfirms linked their laboratories more tightly to market-oriented production, orrestructured themselves if those linkages had become attenuated and the lagsbetween discovery and product marketing had become too long.

United States capital markets in the 1980s were already deep and had escapedfrom the control of banks. Venture capital funds already existed, and had thrived,although not to the extent that would be seen in the next decade. Hence theinstitutional infrastructure was ready when entrepreneurs—mostly in the United States(although many were foreign-born)—came looking for funds. As U.S. capitalmarkets responded, they became even more important for entrepreneurs, and theUnited States even more promising as the locale for start-ups.

Socially and militarily, as we have seen, conjunctures were also important. Theinformation revolution brought Hollywood to more and more television and moviescreens around the world, just when the ideological resistance to American popularculture had fallen. And precision-guided weapons and instruments of informationwarfare entered the American arsenal just as Soviet collapse had removed the onlypowerful, if crudely armed, rival.

In sum, the end of the Cold War had profound but uneven effects on globaliza-tion. These effects derived not from the collapse of the Soviet Union alone, butfrom that collapse in conjunction with a variety of other forces. One result was anAmericanization of globalism: as we have seen, America did not create globalism,but it shaped the form that contemporary globalism has taken at the beginning ofthe new millennium.

POLITICS, EQUITY, POWER, AND GOVERNANCE

Globalization affects governance through its impact on the domestic politics ofstates; by the way it affects the distribution of benefits from economic activity—thatis, on equity within and between states; and by the way it affects power relationshipsamong states. Finally, it has implications for governance. We consider each of theseissues in turn.


Globalism and Domestic PoliticsThe transnational flows that thicken globalism affect the politics and governance ofvarious societies in different ways. Economic globalism, for instance, can affect politicalcoalitions and, therefore, policy preferences of states.47 For example, trade protection-ism in the United States has declined, since increasing exports have strengthenedpro-export interests, and increasing imports have weakened import-competing firmsand industries. As we noted in our discussion of the 1997–98 world financial crisis,globalism can also undermine the efficacy of macroeconomic policy and can triggercrises that affect politics. In that crisis, even well-managed economies such as HongKong suffered shocks, and markets that seemed quite remote from the crisis—such asthe market for U.S. treasury bonds—were profoundly affected (leading to the collapseof Long-Term Capital Management, a huge hedge fund). In response to a crisis whoseorigins did not lie in U.S. policy, the United States Federal Reserve Board reducedinterest rates three times in the fall of 1998.

Environmental globalism has also had pronounced effects on political coalitionsand networks, as citizens in a variety of countries have reacted to dangers to theglobal environment.48 Campaigns in industrialized northern countries to saveBrazilian rain forests or prevent the building of dams in India provide cases in point.

Military globalism can have profound effects on domestic politics in very differentways. Projecting military power over large distances, the United States and its allieswrested Kosovo from Serbian control and thereby altered the boundaries of a polity,if not yet leading to a formal change in sovereignty over that territory. United Statesmilitary action has surely affected domestic politics in Iraq, Somalia, and Serbia.However, it is not at all clear that these effects have been consistent with the desiresof American policymakers. What comes through most clearly by listing these casesis the difficulty of achieving desired results, in terms of domestic politics, through theuse of military force. Military globalism surely has effects, but its unintended conse-quences for domestic politics may often outweigh its intended ones.

Social globalism may have the most profound effects, although they are thehardest clearly to identify. The flow of ideas about democracy, capitalism, individu-alism, or sheer self-indulgence is hard for any society to block, as we note in Chapter9. No magic technical innovation, such as a “v-chip,” can keep ideas from movingthrough the Internet and across telephone lines around the world. The effects onpolitical communities—who identifies with whom, or against whom—can beprofound. The impact of globalization may be extremely uneven, altering theidentities and relations of political communities in very different ways. Witnessthe different effects on rural versus urban groups in former Yugoslavia, or disputes inIran today between the ultra-conservative clergy and the liberalizing modernizers.One of the Iranian students who organized the takeover of the United Statesembassy and seizure of hostages in 1979 recently said, “For Americans freedom is aneveryday commodity, but for us, under the Shah’s dictatorship, it was somethingunknown. So when we took the embassy, we acted on the basis of what we knew,and that was despotism. Today we have chosen a different course, based on what welearned from the last twenty years.”49


The net effect of globalism on governmental institutions is likely to vary fromsituation to situation. Sometimes, globalism clearly weakens them. For instance,mobile factors of production may weaken the ability of governments to set andcollect taxes, and the movement of liberal ideas may weaken the ability of theocra-cies to dominate their countries’ politics. But sometimes globalism seems tostrengthen governments. Economic globalism has helped bring prosperity to EastAsia and strengthen the government of Singapore. Social globalism can reinforcethe sense of being a “leader in the world” of countries that are imitated—such as theUnited States—and therefore strengthen support for their governments. And theglobal reach of American military power, as in the bombing of the Chinese embassyin Belgrade in May of 1999, seems to have created a surge of nationalism thatstrengthened support for the Beijing authorities.

Global effects are powerful. But they do not enter societies in an unmediatedway. On the contrary, they are filtered both by cultural differences and by domesticpolitics. How global information is downloaded in different countries is a functionof domestic politics. In that sense, even in an age of globalism, all politics remainslocal. Different political systems have different capacities to shape the economic,sociological, environmental, and military forces that impinge on them; their peoplehave different values, relative to those forces; and their political institutions reactdifferently with those values to produce policies of response.

Domestic politics can shape the effects of globalism in a variety of ways.Domestic institutions may block signals coming into the societies—of market prices,for instance.50 Socialist systems like that of the former Soviet Union blocked pricesignals from entering their markets; trade barriers, capital controls, and distortedexchange rate arrangements can have similar effects. Governments may also seek toblock broader social ideas from entry, although doing so is very difficult, particularlyif the government also seeks to modernize, and therefore to promote, education. InChapter 9 we briefly explored how governments such as those of Singapore andChina may attempt to keep their people, or some of them, from connecting fully tothe Internet, thus reducing or biasing social globalism.

Domestic institutions also channel responses to change. Some countries imitatesuccess, as exemplified by democratizing capitalist societies from Korea to eastEurope. Some accommodate in distinctive and ingenious ways: for instance, smallEuropean states have responded to economic openness by maintaining relativelylarge governments and emphasizing compensation for disadvantaged sectors, whilethe Anglo-American industrialized countries have, in general, emphasized markets,competition, and deregulation. Others accommodate without accepting the valuesunderlying the dominant societies—China since 1978, and to some extent Indiaand Japan, fall into this broad category. Sometimes such accommodation seems tosucceed, as in Singapore; in other situations, such as the Soviet Union underGorbachev, accommodation leads to regime collapse. Still other societies resistglobalism strongly, even violently. Iran under the Mullahs and other countriesdominated by Islamic fundamentalism, such as Afghanistan and the Sudan, havefollowed the path of resistance.


Even if societies would benefit, in their own value terms, from imitating or accom-modating, their domestic institutions may also freeze their policies. An example ofinstitutions freezing coalitions and policies is provided by Japan, which did notrestructure its politics, banking, or corporate sectors to cope adequately with thedemands of the information age. The result in the 1990s was economic stagnation,reflected in growth rates that fell from 4 percent per annum to zero during the decade;unprecedented unemployment; and—as a social consequence—a rise in suicide.

Finally, domestic institutions and divisions—economic or ethnic—can lead todomestic conflict, which can reformulate ethnic and political identities in profoundand often unanticipated ways. In Bosnia, political entrepreneurs appealed totraditional identities of the rural areas to overwhelm and dissolve the cosmopolitanidentities that had begun to develop in the cities. And Iran has seen strugglesbetween Islamic fundamentalists and their more liberal opponents—who are alsoIslamic but more sympathetic to Western ideas.

Equity and the Political Effects of Increasing InequalityThe Industrial Revolution led to a huge increase in global inequality. In 1800, percapita incomes in rich countries were about four times those in poor countries; nowthey are about 30 times larger. Until 1960, the trends were clearly in the direction ofinequality. Since 1960, however, there has been a “great plateau.” Weightingcountries by population, there has neither been divergence nor convergence:inter-country inequality has remained about the same. Somewhat more rapid growthin poor countries has been counterbalanced by faster population growth in thosecountries, yielding no significant overall change in per capita income, whenmeasured in terms of purchasing power.51

These aggregate figures, however, conceal a great deal of variation by country.The experience of successful countries demonstrates that movement out of povertyis possible, although often hindered by political factors as well as resourceconstraints. Most of the poorest countries in the world—whether in Africa orAsia—have suffered from misrule, corruption and inept macroeconomic policies.The weakness of their political systems can be blamed in part on colonialism andnineteenth-century globalization, but the sources of their recent poor performanceare more complex. Several countries in East Asia that were very poor in the 1950sused networks of globalization to greatly increase their wealth and status in theworld economy. In 1957 Ghana’s per capita gross national product was 9 percenthigher than South Korea’s52; today South Korea’s per capita income is thirty timesthat of Ghana.53 Between 1975 and 1995, Korea’s per capita income grew at 7 percentper year (doubling twice) while Ghana’s contracted by 0.4 percent per year. Theissue is not merely geographic, since a number of other Asian countries have trajec-tories more similar to Ghana than South Korea: for instance, Laos, Myanmar, andNepal all have low and stagnant levels of economic development.

Equally striking is maldistribution of the benefits of globalization by individuals,within and across countries. Thomas Friedman has argued that countries that havebenefited from economic globalization have put on a “golden straightjacket” in


which they both gain and are constrained by market forces. The problem is that inmany countries, some citizens get more of the gold while others feel more of thejacket. For instance, in Brazil in 1995, the richest tenth of the population receivedalmost half of national income, and the richest fifth had 64 percent, while thepoorest fifth had only 2.5 percent and the poorest tenth less than one percent. Inthe United States, the richest tenth received 28 percent of income, and the richestfifth 45 percent, while the poorest fifth had almost five percent and the pooresttenth a mere 1.5 percent.54 Across countries, inequalities are even more dramatic:the richest three billionaires in the world in 1998 had combined assets greater thanthe combined annual incomes of the 600 million people in the world’s leastdeveloped countries.55

In analyzing inequalities within countries, causation is at least as complex as inanalyzing inequalities among them. The United States has seen growing inequalityin wages over the same three decades that globalization has greatly increased.Populist politicians have blamed the inequality (and the insecurity that accompa-nies industrial restructuring) on globalization. But again causation is difficult topinpoint since several changes have been occurring at the same time. Part of thecause is Schumpeter’s “creative destruction,” as technology has been substituted forlabor as part of the information revolution. Part has been changes in the composi-tion of the labor force (an increased role of women) and in economic institutions(the weakening of labor unions). And part has been increased trade and immigra-tion (economic and social globalization). Many economists think that the domesticfactors outweigh the global, but even here precise judgment is difficult becauseglobal competition may affect the rate of uptake of new technology.56 What is clearis that even when global processes such as immigration may benefit the country as awhole, some employers, ranging from garment manufacturers to wealthy householdsseeking servants, may gain from increased availability of cheap labor at the sametime that unskilled workers’ wages are depressed by increased competition.57

Consider also China, a poor country that has been growing very fast since itsleaders decided to open their economy, thus becoming subject to globalization.Between 1976 and 1997, China’s GDP per capita grew at an average rate of almost8 percent, implying an overall increase of 450 percent over that time. At the sametime, its “human development index” as calculated by the United Nations—reflecting life expectancy, educational attainment, and GDP per capita—alsoshowed dramatic gains.58

Statistics expressed in terms of money incomes are not necessarily the bestmeasures of inequality. The key issues involve their consequences for the length andquality of life. Over the last several decades, average life expectancy in developingcountries has risen substantially. Yet in the least developed countries, life expectancyis still under 52 years, as compared with almost 78 years in industrialized countries.The adult literacy rate, a basic quality of life measurement, is barely 50 percent inthe poorest countries, compared with over 98 percent in the rich countries.

As we have noted above, an earlier wave of economic globalization took placeduring the forty to fifty years before World War I, only to be ended both by the warand by the social and economic disruptions of the interwar period. In the late


nineteenth century, inequality rose in rich countries and fell in poor countries, anda third to a half of the rise in inequality could be attributed to the effects ofglobalization. Many of these changes were due then to mass migration, whichexplained about 70 percent of the real wage convergence in the late nineteenthcentury.59 The political consequences of these shifts in inequality are complex, butKarl Polanyi argued powerfully in his classic study The Great Transformation that themarket forces unleashed by the Industrial Revolution and globalization in thenineteenth century not only produced great economic gains, but also great socialdisruptions and inequalities that in turn led to the political reactions of fascism andcommunism.60 The point is not that there is any automatic relationship betweeninequality and political reaction, but that such inequalities can give rise to politicalreactions that could eventually lead to restrictions on economic globalization.

The issue of political stability has implications for the argument that economicglobalization is incompatible with the welfare state, which has put a floor underpoverty and insecurity in Western democracies since the 1940s. Certainly, globaleconomic competition creates constraints on the welfare state, but the incompati-bility may be overstated when seen in a political context. An adequate standard ofwelfare and security is likely to be the price that has to be paid to allow openness toglobal market forces in democracies. Small European countries with the most gener-ous welfare states have also had the most open economies.61 Complete laissez-fairemay turn out to be a short-sighted response to economic globalism in the long term.

Power and NetworksAfter the end of the Cold War, in a period of globalization and the informationrevolution, the United States has become more powerful, on a global basis, than anystate in previous history. United States missiles can strike targets in Kosovo or Iraqwithout fear of effective retaliation, and even against its strongest competitors,United States military power is overwhelming.

The centrality of the United States in all four dimensions of contemporaryglobalization is undeniable. One way to see this is to think further about ourdefinition of globalism as networks of interdependence at multicontinentaldistances. A network is a series of connections of points in a system. Networks canhave a variety of architectures with descending degrees of centralization andcomplexity of connections, such as a hub and spokes, a spider web, an electric grid,the Internet, and so forth. Theorists of networks argue that under most conditionscentrality in networks conveys power.62 As a first approximation, one could seeglobalism as a network with an American hub, and with spokes reaching out to therest of the world. There is some truth in this picture. The United States is central toall four forms of globalization: economic, military, social, and environmental (as thebiggest polluter, whose political support is necessary for effective action on environ-mental issues). As we have argued above, that the United States has played a centralrole in the current phase of globalization for a variety of reasons, including itssyncretic culture, market size, the effectiveness of some of its institutions, and itsmilitary force. And this centrality has in turn benefited American “hard” and “soft”


power: its ability to induce others to do what they would not otherwise do (hardpower) and to persuade others that they should want what the United States desiresthem to want (soft power).

Yet for three reasons it would be a mistake to envisage contemporary networksof globalism simply in terms of a hub and spokes of an American empire that createsdependency for smaller countries. This metaphor is useful as one perspective onglobalization, but it does not provide the whole picture.

First, the architecture of networks of interdependence varies according to thedifferent dimensions of globalism. The hub and spokes metaphor fits militaryglobalism more closely than economic, environmental, or social globalism. Andeven in the military area, most states are more concerned about threats from neigh-bors than from the United States, a fact that leads many to call in American globalmilitary power to redress local balances. That is, in the military area, the hub andspokes metaphor fits power relations better than it portrays threat relations.

Second, the hub and spokes dependency model may mislead us about an appar-ent absence of reciprocity in sensitivity and vulnerability. Even in the militarydimension, where power is most skewed, the ability of the United States to strike anyplace in the world does not make it invulnerable. Other states and movements couldemploy unconventional uses of force, or in the long term, develop weapons ofmass destruction with delivery systems that would enable them to threaten theUnited States. And while the United States has the largest economy, it is both sensitiveand potentially vulnerable to the spread of contagions in global capital markets. Inthe social dimension, the United States may export more popular culture than anyother country, but it also imports more ideas and immigrants than most countries.Managing immigration turns out to be an extremely sensitive and important aspectof the response to globalism. Finally, the United States is environmentally sensitiveand vulnerable to actions that it cannot control abroad, such as emissions fromcoal-fired power plants in China that could accelerate global climate change.

A third problem with the simple hub and spokes dependency model is that itfails to identify other important connections and nodes in the networks. Asmentioned above, viewed from Gabon, Paris is more important than Washington;and Moscow is more important in Central Asia. The Maldive Islands, only a few feetabove sea level in the Indian Ocean, are sensitive to the potential effects of produc-ing carbon dioxide in the rest of the world. They are also completely vulnerable,since it is hard to imagine policy changes that could allow them to escape thatsensitivity. At the same time, China has more choices about how much coal it burnsand in the future may become more relevant to the Maldives than the United Stateswill be. Finally, as the prior example suggests, the hub and spokes model may blindus to changes that are taking place in the architecture of the global networks.Network theorists argue that central powers benefit most when there are structuralholes—gaps in communications—among other participants. The growth of theInternet may change this.63 It is true, for example, that Americans comprised morethan half of all Internet users at the beginning of the twenty-first century. It is quiteunlikely to be true two decades hence. With the inevitable spread of technologicalcapabilities, network architectures are likely to evolve.


The key point is that networks of globalism are complex and are subject tochange. The United States now seems to be “bestride the world like a colossus.”Looking more closely, we see that American dominance varies by issue-area andthat many relationships of interdependence go both ways. Large states like theUnited States—or to a lesser extent, China—often have more degrees of freedomthan do small states, but they are rarely exempt from its effects. Over the longerterm, furthermore, we can expect globalization itself to reduce the extent ofAmerican dominance, as capabilities spread.

Governance of GlobalismIf laissez-faire is likely to be unstable in the long term, and networks of interdepend-ence are stretching beyond the boundaries of the nation state, how is globalism to begoverned? Some writers draw an analogy from American history. Just as the devel-opment of a national economy in the late nineteenth century led to the growth offederal government power in Washington, so the development of a global economywill require federal power at the global level.64 Some see the United Nations as theincipient core.65 But the American analogy can be misleading. The thirteen originalcolonies shared far more in English language and culture than the two hundrednations of the world today, and even the Americans did not avoid a bloody civil war.By the time a continental economy developed, the framework of the Americanfederation was firmly in place. If we merely await a “Madisonian moment,” we mayfind ourselves overtaken by events.

No new “Constitution for the World” is likely to be acceptable in our lifetime,or those of our children or grandchildren. The political and cultural diversity of theworld—as well as its sheer size—make such a prospect remote. However, as long asglobalization continues, states and other actors will find that their own values areincreasingly affected by the actions of others. They will therefore seek to regulatethe effects of interdependence: that is, to govern globalization.

Such governance can take a variety of forms. Here we identify five:

1. Unilateral state action within territorial boundaries to reduce vulnerability oradopt external standards to enhance competitiveness.

2. Unilateral action, by powerful states and blocs, to affect the actors of states,firms, and nongovernmental organizations (NGOs) outside their territories.

3. Regional cooperation to increase policy effectiveness.4. Multilateral cooperation on a global level, forming international regimes (see

Chapters 3–6) to govern globalization.5. Transnational and transgovernmental cooperation—involving “civil society”—

to govern globalization in ways not involving coherent state action.

Each of these responses to globalization constitutes an attempt at governance, but thesum of these attempts is likely to be fragmented and messy, as global governance is now.

States and firms typically react to adverse cross-border effects—that is, toheightened sensitivity to external shocks—by internal actions to decrease theirvulnerability. These may take the form of creation of barriers to cross-border


exchange or of internal economic policy adjustments to reduce the costs of externalchange. For instance, after the oil shock of 1974 the industrialized countries took avariety of measures, more or less effective, to respond to the tripling of the price ofimported oil. In the 1980s United States firms reacted to the high dollar by internalchanges that increased their efficiency and competitiveness. Finally, the informa-tion revolution of the 1990s has created particular difficulties for politicaleconomies organized in the Continental European manner (with large welfarestates and rigid labor markets) and those organized in the East Asian manner (withclose linkages among governments, banks, and industrial groupings). Many of themeasures taken by governments of these countries, and to some extent by theEuropean Union, can be seen as internal responses to the external pressures ofglobalization. In Dani Rodrik’s words, “The real policy challenge is: how do wemake the world safe for different brands of national capitalism to prosper side byside?” His answer involves multilateral procedures, low but not zero barriers, andrules of the game that allow countries to reimpose restrictions when not doing sowould jeopardize a legitimate national objective.66

It is often costly to resist globalization, and the golden straightjacket will betighter for some than for others. Power is important as a determinant of outcomes.Some weak states may have few options for adjusting to changes that are not partic-ularly welcome, at least in certain areas (notably responses to integrated financialmarkets and environmental systems). For powerful states, however, a second set ofresponses is possible. These states (and strong regional organizations, notably theEuropean Union) can act unilaterally or with one or two favored partners to forcepolicy changes by others. The list of such actions by the United States during thelate 1980s and early 1990s is long, including unilateral trade retaliation, efforts tosave dolphins or achieve other benign environmental objectives through unilateralaction, and pressure (in this case collaborating with Britain) for capital adequacystandards imposed on banks.

These first two sets of governance practices reinforce a relatively obvious point:the key institution for global governance for the relevant future is going to be thenation-state. Notice of its death is premature.67 In the face of globalization,however, unilateral measures will often be insufficient, will fail, or will generatecounter-reactions. States facing increased globalization will become, therefore,increasingly willing to sacrifice some of their own legal freedom of action in order toconstrain, and make more predictable, others’ actions toward themselves. Some ofthis cooperation will take place on a regional level. Indeed, since the early 1980sthere has been a revival of the economic regionalism in the world that was alreadygrowing in the 1960s. The European Union has created a single market andmonetary union; the North American Free Trade Area (NAFTA) and Mercosur, inSouth America, have been formed; and some strengthening of regionalism has evenoccurred on the Pacific Rim.68

Regionalism can be seen as a response to domestic politics, but also as a responseto globalization. Regionalization may enable a group of states to reach a sufficient“critical mass” to make more effective its regulations toward global corporations andother mobile entities. For instance, the European Union is much more able to


respond to unilateral United States policy as a group, than the individual countriesof Europe would be able to do.

The fourth form of cooperation involves multilateral collaboration leading tothe formation of international regimes on a global level, such as those for money andoceans discussed in Chapters 4–6. To achieve gains they want, most states will findthat they will have to cooperate. It is important to note that cooperation does notimply harmony. On the contrary, cooperation arises out of discord, along with theshared belief that mutual adjustment is necessary—albeit often painful.69

Cooperation may take the form of bilateral and multilateral treaties; informalagreements among bureaucracies; and delegation to formal intergovernmentalinstitutions. Regulation of global flows will often grow by layers of accretion ratherthan by a single treaty and will long remain imperfect. But imperfect regulation isnot the same as no regulation—witness traffic laws in many domestic societies.Some cases will be easier than others. For example, cooperation on prosecution ofchild pornography on the Internet is proving easier than regulation of hate mail. Inthe first case, there are more shared norms than in the latter.70

International regimes take many forms, with a variety of rules, disputesettle-ment procedures, and loopholes. Some regimes have become strengthened overtime—even legalized, with more obligatory and precise rules, and with dispute-settlement arrangements. In the politics of trade, for instance, since 1995 the rulesof the World Trade Organization (WTO) have authorized third-party arbitrators toadjudicate trade disputes. Yet at the same time, these same regimes may build inprovisions that cushion the effects of such external governance. The WTO, forinstance, does not force states that fail to comply with their liberal trade obligationsto do so—much less does it enforce compliance. When losing defendants fail tofollow a judgment, the WTO instead authorizes other states to retaliate in areas oftheir own choosing, thus gaining compensation without overriding the defendantgovernment’s sovereignty. Such arrangements may prove as useful as fuse boxes inelectrical systems, by helping to reconcile overall principles with the realities ofdomestic pressure groups in democratic politics.

Finally, some attempts at governance will not involve states as coherent units,but will be either transgovernmental, through which components of states engagewith one another—or transnational, involving nongovernmental actors. That is,alongside the necessary but imperfect interstate institutional framework, there isdeveloping an informal political process that supplements the formal process ofcooperative relations among states. In the public sector, there is an increase intransgovernmental interactions in which different components of governmentshave informal contacts.\71 Even lawyers and courts are engaging in such contacts.Rare is the embassy of a large democratic state today in which the foreign servicepersonnel form a majority of those stationed abroad. In the private market sector,transnational corporations and offshore fund managers are playing a larger role thanever. Their practices and standards often create de facto governance. As Sassenpoints out, “International commercial arbitration is basically a private justice systemand credit rating agencies are private gate-keeping systems. Along with other suchinstitutions, they have emerged as important governance mechanisms whose


authority is not centered in the state.”72 In the private nonprofit sector, there hasbeen an extraordinary growth of organizations, still largely Western, but increasinglytransnational. For reasons discussed in Chapter 9, these organizations and themultiple channels of access across borders are able to put increasing leverage onstates, intergovernmental organizations as well as transnational corporations. Thecombination of private, transgovernmental, and transnational actors is creating anincipient, albeit imperfect, civil society at the global level.

There are interesting implications for democratic theory and practice. One ofthe problems of reconciling globalism and democratic theory is determining what isthe relevant public.73 If a public space is an identifiable set of issues linked to eachother, a public is a set of groups and individuals that communicate with each otherand act within that space. Some of these spaces are national, but some are transna-tional. If democracy implies majority rule (as one condition), what is the relevantmajority? Who votes, and within what boundaries? In principle, intergovernmentalcooperation solves the problem of democratic accountability. Insofar as the cooper-ating governments are democratic, they answer to their own electorates. But theactions of such international organizations are often opaque and remote from thedaily life of citizens. Long chains of connection attenuate accountability. Thus itmay help if they are supplemented by accountability to an incipient internationalcivil society. Private firms are accountable to markets rather than electorates, andNGOs are usually nonelected elites. Nonetheless, by publicizing and agitating aboutthe actions of governments, firms, and international organizations, they increasetransparency and bring pressures to bear on elected governments, which helps openup and pluralize, if not democratize, global governance.

Of the forms of governance that we have discussed, some aspects of the firstone—internal adjustment—could lead to deglobalization, insofar as it takes theform of increasing barriers at the borders. Such a reaction—as seen in the periodbetween the onset of World War I and the end of World War II—cannot beexcluded. Although globalization is likely to continue for a while, domesticmovements to oppose it periodically appear in a variety of countries. The fact thatdemocratic accountability is difficult to achieve in a globalized world makes policiesfostering globalization vulnerable to legitimate criticism.

We neither assume that globalization will inevitably continue, nor do we take anormative position on its net effects. One’s normative judgment on globalizationshould be contingent both on one’s understanding of causal relationships that arepoorly understood, and on one’s values. Since globalization involves change, uncer-tainty, and risk, opinions on it are also likely to reflect different degrees of optimismversus pessimism and risk aversion. However, the very multidimensionality ofglobalization means that there is no reason why an individual should regard all of itas “good” or “bad.” It would be sensible, on the contrary, to be selective in one’sattitudes toward it. Different forms of globalization, as well as competing responsesto them, remain a subject for debate.

Think of social space as encompassed by a triangle whose three points aremarkets, governments, and civil societies. All points of the triangle, as well asrelations among them, are being affected by the information revolution and the


current phase of globalization. Markets are expanding, and corporate structures arebecoming more like networks. In civil societies, new organizations and channels ofcontact are cutting across national borders. At the same time, the forms andfunctions of government are being pressed to change in relation to the economy andsociety. Eventually, changes may also develop in peoples’ minds. Multiple levels ofloyalty already exist in many countries, and new types of community may evolve.While the system of sovereign states is likely to continue as the dominant structurein the world, the content of world politics is changing. More dimensions thanever—but not all—are beginning to approximate our ideal type of complex interde-pendence. Such trends can be set back, perhaps reversed, by cataclysmic events ashas happened in earlier phases of globalization. History always has surprises. Buthistory’s surprises always occur against the background of what has gone before. Thesurprises of the early twenty-first century will, no doubt, be profoundly affected bythe processes of contemporary globalization that we have tried to analyze here.

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AFTERWORDPrincipal Themes of Power and InterdependenceThe Research Program of Power and Interdependence: ACritiqueLimitations of Structural Theory: Systemic Political ProcessesPerceptions and LearningConclusion

TWO CHEERS FOR MULTILATERALISMThe Need for RegimesUnrealistic VisionsRegime Maintenance

Second Thoughts onTheory and Policy (1989)

VIPART


261

As we indicated in our Preface to this edition, we have many observations to makeabout Power and Interdependence and the reception it received in the literature ofinternational relations. Our purpose is not principally defensive: indeed, we wereenormously pleased and often flattered by the attention given to our book. Instead,we wish to clarify our position, since misinterpretation by intelligent critics usuallyreflects confusion or poor statement on the part of authors, and to suggest directionsfor future research.

We begin in Section 1 by examining the three most important themes of Powerand Interdependence: the relationship between power and interdependence, the idealtype of complex interdependence, and explanations of changes in internationalregimes. In Section 2 we offer a critique of our concepts and theories and examinewhich elements of our argument have been most fruitful for later work. In Sections3 and 4 we raise questions about concepts, such as those of “systemic politicalprocess” and “learning,” which we did not explicate clearly in Power andInterdependence but which we think suggest fruitful directions for future research.

1. PRINCIPAL THEMES OF POWER ANDINTERDEPENDENCE

In Power and Interdependence we identified “political realism” with acceptance of theview that state behavior is “dominated by the constant danger of military conflict,”and we argued that “during the 1960s, many otherwise keen observers who acceptedrealist approaches were slow to perceive the development of new issues that did not

Afterword*

*This Afterword is a revised version of Robert O. Keohane and Joseph S. Nye, “Power andInterdependence Revisited,” International Organization 41, no. 4 (Autumn 1987): 725–53. It is reprinted ver-batim from the second edition of Power and Interdependence (1989).

262 Afterword

center on military-security concerns” (p. 5). As we had done in our edited volume,Transnational Relations and World Politics,1 we pointed to the importance of “today’smultidimensional economic, social, and ecological interdependence” (p. 4). YetPower and Interdependence had a different tone from both our earlier writings andpopularizers of economic interdependence. We criticized modernist writers who “seeour era as one in which the territorial state, which has been dominant in worldpolitics for the four centuries since feudal times ended is . . . being eclipsed bynonterritorial actors such as multinational corporations, transnational socialmovements, and international organizations” (p. 3). In our view, to exchange real-ism “for an equally simple view—for instance, that military force is obsolete andeconomic interdependence benign—would condemn one to equally grave, thoughdifferent, errors” (p. 5).

We did argue that the use of force has become increasingly costly for majorstates as a result of four conditions: (1) risks of nuclear escalation; (2) resistance bypeople in poor or weak countries; (3) uncertain and possibly negative effects on theachievement of economic goals; and (4) domestic opinion opposed to the humancosts of force. But we also noted that the fourth condition had little impact on thepolicies of totalitarian or authoritarian governments, and we warned that “lesserstates involved in regional rivalries and nonstate terrorist groups may find it easier touse force than before. The net effect of these contrary trends in the role of force is toerode hierarchy based on military power” (p. 228).

Upon rereading, we think that the general argument has held up rather well.Vietnam’s invasion of Cambodia, Israel’s of Lebanon, and the Iran-Iraq war allindicate that force remains an option in regional rivalries between small or middlepowers. But systemic constraints continue to limit the superpowers’ use of force.Nuclear force remains useful principally as a deterrence to attack. Nationalism hasacted as a constraint on the superpowers, as both the failure of Soviet intervention inAfghanistan and the weakness of the American response to Iran’s taking of hostageshave indicated. Even in Central America the Reagan administration, despite itsideological commitment, has been cautious about introducing United States groundforces. Compare the relatively low cost and effectiveness of the Eisenhower adminis-tration’s interventions in Iran (1953), Guatemala (1954), and Lebanon (1958) withthe more recent difficulties encountered by the United States in Iran, Nicaragua, andLebanon during the 1980s. The use of force against a narrowly based regime in theministate of Grenada and the limited air strikes against Libya are the apparentexceptions that prove the rule: Grenada was virtually powerless, and against Libyathe United States avoided commitment of ground troops.

Our argument about constraints on the use of military force laid the basis for ouranalysis of the politics of economic interdependence. This analysis contained threeprincipal themes, which we did not explicitly distinguish from one another:

1. A power-oriented analysis of the politics of interdependence, drawing onbargaining theory;

2. An analysis of an ideal type that we called “complex interdependence” and ofthe impact of the processes that it encompassed;

3. An attempt to explain changes in international regimes—which we defined as“sets of governing arrangements that affect relationships of interdependence”(p. 19).

Our analysis of interdependence is developed in Chapter 1, which links interde-pendence to power through the concept of asymmetrical interdependence as apower resource. “It is asymmetries in interdependence,” we wrote, “that are mostlikely to provide sources of influence for actors in their dealings with one another”(pp. 10–11, italics in original). This concept, that asymmetrical interdependence isa source of power, can be found clearly in Albert Hirschman’s National Power and theStructure of Foreign Trade,2 as well as in Kenneth Waltz’s article, “The Myth ofNational Interdependence.”3

Our analysis linked realist and neorealist analysis to liberal concerns withinterdependence. Realism and neorealism both emphasize states’ demands forpower and security and the dangers to states’ survival; the key difference betweenthem is that neorealism, as in the work of Waltz, aspires to the status of science.4

(When realism and neorealism make similar claims, we use “realism” only toavoid cumbersome language. When referring specifically to the scientificallyformulated theories of Kenneth N. Waltz and scholars with similar views, we use“neorealism.”) Military force is for both versions of realism, the most importantpower resource in world politics. States must rely ultimately on their ownresources and must strive to maintain their relative positions in the system, evenat high economic cost. Liberalism also examines state action but directs itsattention to other groups as well. For liberal thinkers, economic incentives are asimportant as concerns for security. Among republics, at any rate, military threatsmay be insignificant, expanding the potential area for cooperation and reducingboth the role of force and the emphasis states place on their relative powerpositions in the international system.

Our respect for the liberal tradition of political analysis reflects our debt to stud-ies of regional integration carried out during the 1950s and 1960s. Karl Deutschfocused on the development of pluralistic security communities—groups of stateswhich developed reliable expectations of peaceful relations and thereby overcamethe security dilemma that realists see as characterizing international politics. ErnstHaas focused on the uniting of Europe and the transformation of the Franco-Germanhostility into a postwar economic and political cooperation. Subsequently, scholarsextended these perspectives on economic, social, and political interdependence andintegration to other regions.5 What these studies had in common was their focus onhow increased transactions and contact changed attitudes and transnationalcoalition opportunities, and the ways in which institutions helped to foster suchprocesses. They focused directly on the political processes of learning and theredefinition of national interests.

The development of regional-integration theory outstripped the development ofregional communities—although the transformation of Western Europe into apluralistic security community is an important accomplishment. We felt, however, thatmany of the insights from integration theory could be transferred to the growing and

1. Principal Themes of Power and Interdependence 263

264 Afterword

broader dimensions of international economic interdependence. Our first study intransnational relations and interdependence broadened the conceptions of hownational interests are learned and changed, but it was only in Power and Interdependencethat we explicitly addressed the conditions under which the assumptions of realismwere sufficient or needed to be supplemented by a more complex model of change. Ourgoal was not to discard the insights of realist theory, but to construct a broader theoret-ical framework that could encompass realist concerns about the structure of powerwhile also explaining changes in the processes of the international system. We soughtto account for the anomalies that arose when realism tried to deal with issues ofinterdependence, and to direct attention to new information and directions forresearch. We were interested in supplementing realism by encompassing it in a broadertheoretical framework, not in trying to destroy it.

The discussion of realism in Power and Interdependence was deliberatelyincomplete. We were less interested in describing the realist tradition than inexamining some of its central assumptions and assessing its relevance for our analysisof the politics of interdependence. Some reviewers took us to task for, in K. J. Holsti’swords, “attempting to apply old approaches or models to areas for which they werenever intended,” and therefore “setting up straw men.” Stanley J. Michalakcommented that our “straw man may well be ‘parsimonious’ and easy to test, but ithas little to do with realism.”6 Liberalism as a traditional theory escaped mentionentirely: although our analysis was clearly rooted in interdependence theory, whichshared key assumptions with liberalism, we made no effort to locate ourselves withrespect to the liberal tradition. We presented a version of regional-integration theorythat avoided teleological arguments and took the distribution of military power,economic power, and the role of states fully into account.7 If we had been moreexplicit about locating our views in relation to the traditions of realism and liberal-ism, we might have avoided some subsequent confusion.

Interdependence generates classic problems of political strategy, since it implies thatthe actions of states, and significant nonstate actors, will impose costs on other membersof the system. These affected actors will respond politically, if they are able, in an attemptto avoid having the burdens of adjustment forced on them. From the foreign-policystandpoint, the problem facing individual governments is how to benefit from interna-tional exchange while maintaining as much autonomy as possible. From the perspectiveof the international system, the problem is how to generate and maintain a mutuallybeneficial pattern of cooperation in the face of competing efforts by governments (andnongovernmental actors) to manipulate the system for their own benefit.8

In analyzing the politics of interdependence, we emphasized that interdependencewould not necessarily lead to cooperation, nor did we assume that its consequenceswould automatically be benign in other respects. The key point was not thatinterdependence made power obsolete—far from it—but that patterns of interdepend-ence and patterns of potential power resources in a given issue area are closelyrelated—indeed, two sides of a single coin. Thus we ought not merely to place realistand liberal perspectives side by side but to link them together in an integrated analysis.As David Baldwin later observed, “It should not be necessary to develop a separatetheory to cover each issue-area of international exchange relations.”9

1. Principal Themes of Power and Interdependence 265

The concept of “complex interdependence,” introduced in Chapter 2,reflected our dissatisfaction with the bargaining analysis of interdependencealone, and our attempt to add insight from theories of regional integration to itsspare realist assumptions. It is important to recognize that “complex interdepend-ence,” as used in Chapter 2, is very different from “interdependence,” as used inChapter 1. “Interdependence” is a very broad term that refers to “situationscharacterized by reciprocal effects among countries or among actors in differentcountries” (p. 8). It is as applicable to the political-military interdependencebetween the Soviet Union and the United States as it is to the political-economicinterdependence between Germany and Italy. “Complex interdependence,” bycontrast, is an ideal type of international system, deliberately constructed tocontrast with a “realist” ideal type that we outlined on the basis of realistassumptions about the nature of international politics. Complex interdependencerefers to a situation among a number of countries in which multiple channels ofcontact connect societies (that is, states do not monopolize these contacts); thereis no hierarchy of issues; and military force is not used by governments toward oneanother (pp. 24–25). We began Chapter 2 by stating that “we do not argue . . .that complex interdependence faithfully reflects world political reality. Quite thecontrary: both it and the realist portrait are ideal types. Most situations will fallsomewhere between these two extremes” (p. 24).

Like the frequently ignored labels on cigarette packages, our warning at thebeginning of Chapter 2 was forgotten by many readers who treated our discussionof complex interdependence as if it were our description of the real world ratherthan our construction of a hypothetical one. For instance, Robert Art’s view ofinterdependence theorists as claiming that a “nation whose economic interestsare deeply entangled with another’s cannot use force . . . interests intertwinedrender force unusable . . .” portrays some theorists in the liberal tradition but notus.10 On the contrary, in Chapter 1 we argued that “it must always be kept inmind, furthermore, that military power dominates economic power . . . yetexercising more dominant forms of power brings higher costs. Thus, relative tocost, there is no guarantee that military means will be more effective thaneconomic ones to achieve a given purpose” (pp. 16–17). J. Martin Rochesterassociates us with a “globalist” or “modernist” view, even though we declared atthe beginning of Power and Interdependence that “neither the modernists nor thetraditionalists have an adequate framework for understanding the politics ofglobal interdependence” (p. 4).11 In contrast to the modernist position, wedisavowed the view that complex interdependence is necessarily the wave of thefuture (pp. 226–29). Indeed, although we began our research on Power andInterdependence largely to confirm the importance of transnational relations, asdiscussed in Transnational Relations and World Politics, our investigations produceda much more qualified judgment.

Chapter 2 of Power and Interdependence treats all real situations in world politicsas falling somewhere on a continuum between the ideal types of realism andcomplex interdependence. Thus our emphasis in Chapter 2 is quite different fromthat in Chapter 1. Instead of explaining bargaining outcomes structurally in terms of

266 Afterword

asymmetrical interdependence, we ask whether the location of a situation on therealism-complex interdependence continuum can help account for the politicalprocesses that we observe. The theoretical lineages of the two chapters are also quitedifferent: Chapter 2 is more indebted to liberal theory in general, and theories ofregional integration in particular, than Chapter 1, which relies on modifiedneorealist analysis. Like regional-integration theory, our discussion of complexinterdependence focuses on transnational and transgovernmental as well asinterstate relations, and it examines how certain patterns of political processes affectactor behavior rather than employing a structural explanation to account for action.

The third major theme of Power and Interdependence concerns internationalregimes, which we define in Chapter 1 as “governing arrangements that affectrelationships of interdependence” (p. 19). Our concept of international regimes isindebted to the work of John Ruggie, who defined regimes in 1975 as “sets of mutualexpectations, generally agreed-to rules, regulations and plans, in accordance withwhich organizational energies and financial commitments are allocated.”12 Despitea claim made by Susan Strange, social scientists did not invent this concept: it has along history in international law.13

Chapter 3 of Power and Interdependence elaborates our concept of internationalregimes and offers four roughly sketched models which purport to account forchanges in those regimes. One model relies on economic and technologicalchange. Two are structural: one uses overall power structure to predict outcomes,while the other relies on the distribution of power within issue areas. The fourth isan “international organization model,” in which networks of relationships, norms,and institutions are important, independent factors helping to explain interna-tional regime change.

The three themes of Power and Interdependence are to some degree distinct.Interdependence can be analyzed politically without endorsing the concepts of com-plex interdependence or international regimes; and the concept of internationalregimes does not depend for its validity on accepting complex interdependence as auseful simplification of reality. Yet we sought to relate our themes to one another. Inparticular, we argued that the explanatory power of overall structure theories ofregime change would be lower under conditions of complex interdependence thanunder realist conditions (p. 161). Nevertheless, since our argument was to someextent “decomposable” into its parts, it should not be surprising that some parts of itfared better in the later scholarly discussion than others.

2. THE RESEARCH PROGRAM OF POWER ANDINTERDEPENDENCE: A CRITIQUE

In Power and Interdependence, we sought to integrate realism and liberalism by usinga conception of interdependence that focused on bargaining. We were cognizant ofthe realities of power but did not regard military force as the chief source of power,nor did we regard security and relative position as the overriding goals of states.Ironically, in view of our earlier work on transnational relations, the result of our

2. The Research Program of Power and Interdependence: A Critique 267

synthetic analysis in Power and Interdependence, and of subsequent work such asKeohane’s After Hegemony, has been to broaden neorealism and provide it with newconcepts rather than to articulate a coherent alternative theoretical framework forthe study of world politics. Of the themes discussed in Section 1, those having to dowith strategic interdependence and international regimes were both most compati-ble with neorealism and most highly developed in Power and Interdependence andlater work. Complex interdependence remained a relatively underdeveloped andundervalued concept.

Interdependence and BargainingIn our analysis of interdependence, we emphasized that asymmetries in militaryvulnerability remain important in world politics: “Military power dominateseconomic power in the sense that economic means alone are likely to be ineffectiveagainst the serious use of military force” (p. 16). Nevertheless, since in our view thecost of using military force was rising, “there is no guarantee that military means willbe more effective than economic ones to achieve a given purpose” (p. 17).

Indeed, we were so cautious about downgrading the role of force that DavidBaldwin criticized us for not going further in our rejection of realism: “AlthoughKeohane and Nye are clearly skeptical about the fungibility of power resources, theyappear unwilling to place the burden of proof on those who maintain that powerresources are highly fungible. . . . Whereas the Sprouts and Dahl reject as practi-cally meaningless any statement about influence that does not clearly indicatescope, Keohane and Nye confine themselves to the suggestion that ‘we may need toreevaluate the usefulness of the homogeneous conception of power.’” He furthercomplained that we “sometimes seem to exaggerate the effectiveness of militaryforce as a power resource.”14

Baldwin was right to point out that Power and Interdependence is not a“modernist” manifesto, however much some of our friends would like it to have beenone. On the contrary, it consistently asks, without dogmatic presuppositions, underwhat conditions liberal or realist theories will provide more accurate accounts ofworld political reality. The extent to which military force is important in a givensituation is to us an empirical question, not one to be decided on the basis ofdogmatic realist or modernist fiat.

Bargaining theory has subsequently clarified some concepts and has qualifiedthe analysis that we, following Hirschman, offered. Baldwin’s work has helped toemphasize the difficulties of using tangible resources successfully to “explain”behavior, as well as the theoretical perils of introducing factors such as “intensity,”“skills,” or “leadership” on a post hoc basis to patch up inadequate accounts.Harrison Wagner15 has shown that being asymmetrically less dependent than one’spartner is neither necessary nor sufficient to exercise influence in a bilateralrelationship. It is not necessary because a weaker actor with intense preferences onone issue may make great concessions on other matters to attain its objectives. It isnot sufficient because in equilibrium, with the terms of agreements fully reflectingbargaining power, even a more powerful actor will not exercise influence on a

268 Afterword

particular issue if doing so requires concessions on other issues that outweigh itsgains. Nevertheless, we believe that asymmetrical interdependence can still be asource of power in bilateral relationships. As Wagner himself is careful to point out,less dependent actors will be able to make bargaining concessions at lower cost thanmore dependent actors. Furthermore, relationships between powerful and weakactors are often defined by multilateral rule or convention, without bilateralbargaining. Under such conditions, strong states willing to break the rules or alterthe conventions may have unexploited bargaining power.16

A bargaining approach to interdependence necessarily raises questions aboutlinkages among issues, since, unless unexploited bargaining power exists, to exerciseinfluence on one issue means making concessions on another. Power andInterdependence may have miscategorized this problem by placing its discussion inChapter 2 (which analyzes complex interdependence), rather than in Chapter 1.After all, many of the highest level issue linkages take place between economic andsecurity affairs in relationships such as the United States’ and the Soviet Union’s.That is, linkage is a phenomenon of realist international politics as much as ofcomplex interdependence. Indeed, we suggested in Chapter 2 that under conditionsof complex interdependence, linkages might become less effective than underrealism (pp. 30–32).

The lack of extensive analysis of issue linkage in Power and Interdependence musthave struck some observant readers as one of the oddest aspects of our book. Ouranalysis of regime change focused on issue-specific sources of power and developed an“issue-structure theory.” Yet as Arthur Stein pointed out, “Linkage is the centralanalytic problem with an issue approach to international politics. Issue compartmen-talization only goes so far. . . . Because there are situations amenable to linkage poli-tics, the viability of an issue-area approach to the study of international politics isitself context-dependent.”17 Despite the importance of the subject, we failed todevelop any theory of linkage that could specify under what conditions linkageswould occur. We argued that under conditions of complex interdependence, a varietyof linkages would be made, particularly by weak states (pp. 122–24), but we left thematter there. This was not for lack of effort: the truth is that we drafted a chapter onthe subject, but since it turned out to be a collection of vague generalizations andillustrative anecdotes, we consigned it to the wastebasket.

Significant progress has bee made on this issue since 1977. In addition toStein, Kenneth Oye and Ernst Haas have developed typologies of linkage thatprovide more sophisticated categories for analysis. Of particular interest are Haas’threefold distinction between tactical, fragmented, and substantive issue linkage andOye’s distinction between “blackmailing” (making a threat one does not wish tocarry out) and “back-scratching” (offering a quid pro quo bargain). Oye’sdistinction is paralleled by Stein’s distinction between coerced and threat-inducedlinkage. Both recall Thomas Schelling’s distinction between a promise and threat:“a promise is costly when it succeeds and a threat is costly when it fails.”18

Other work on issue linkage has gone beyond typology by applying a rigorouseconomic or public-choice approach. The basic insight of this argument is that issuelinkage is like economic exchange: up to a point, one can increase one’s utility by


acquiring more of a scarce good to exchange for a plentiful one. Robert E. Tollisonand Thomas E. Willett wrote a pioneering article to this effect in 1979, and JamesSebenius has employed game theory and an analysis of negotiations on the law ofthe sea in an attempt to specify the conditions under which linking issues togethercan create new possibilities for mutually beneficial bargaining.19

It should be noted that this progress has been made at the cost of using simpletwo-actor models. Yet a key feature of issue linkage in world politics is that itnecessarily involves intragovernmental as well as intergovernmental struggles. If agovernment seeks to make a gain on issue X by linking it to issue Y, it is in effectexchanging some of the good involved in issue Y for that in issue X. For example, ifa government seeks to stop nuclear proliferation by threatening to stop a potentialproliferator from receiving equipment for nuclear power plants, it sacrifices the goalof expanding exports for the goal of stopping proliferation. This policy is not likelyto be welcomed by the governmental agencies charged with the task of exportpromotion. Indeed, there will probably be intragovernmental conflict over thepolicy, which may, in some circumstances, become a matter for transgovernmentalcoalitions. Future work on linkage will need to combine the analytical rigor orrational-choice approaches with insights into the complex multilevel games whichtypically accompany issue linkage in world politics.20

The major contribution of Power and Interdependence to the study of interde-pendence and bargaining was to stress that any analysis of the politics ofinterdependence requires a sophisticated conception of bargaining, and thatpatterns of economic interdependence have implications for power and vice versa.We did not successfully develop a theory of linkage, which would indeed have fur-thered our understanding of world politics. Instead, we simply moved the neorealistresearch program a little further toward taking into account relationships betweenpolitical-economic interaction and patterns of military-political conflict. Yet neitherof us is satisfied with this, or with neorealism’s stress on state interest and power, orits static orientation. Other aspects of our work—for example, interdependence andregime change—cut more sharply against the neorealist paradigm.

Complex InterdependenceThe concept of complex interdependence is clearly liberal rather than realist. Wemade no attempt to integrate complex interdependence with realist conceptions ofpower and structure—on the contrary, our view of complex interdependence was inopposition to a realist ideal-typical view of world politics. Yet precisely because weinsisted that complex interdependence is an ideal type rather than an accuratedescription of world politics or a forecast of trends, its relevance to contemporaryworld politics is ambiguous.21

We did not pursue complex interdependence as a theory, but as a thoughtexperiment about what politics might look like if the basic assumptions of realismwere reversed. We therefore did not draw upon liberal theory as fully as we might have.Had we done so, perhaps the concept would have been better developed and morereadily understood. We did, however, carry out quite an extensive set of empirical

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investigations to explore the political processes of complex interdependence, and weclosely examined two issue areas (oceans and international finance, in Chapter 5) andtwo-country relationships (United States–Canada and United States–Australia, forthe period 1920–1970, in Chapter 7). These cases functioned as paired comparisons:for oceans and the United States–Canada relationship, there is much evidence ofcomplex interdependence; for finance (due to its political-economic centrality forgovernments) and for United States–Australia (due to distance and the primacy ofsecurity concerns), complex interdependence was much less evident.

The incompleteness of our treatment of complex interdependence is, we fear,partly responsible for the fact that its theoretical implications have been largelyignored. As mentioned earlier, our discussion in Chapter 2 was organized around thecontinuum between realism and complex interdependence. In effect, the position ofa given situation along this continuum constitutes the independent variable for ouranalysis. Yet the relationship between this independent variable and what we soughtto explain was somewhat muddled. In Power and Interdependence, complex interde-pendence has three main characteristics: (1) state policy goals are not arranged instable hierarchies, but are subject to trade-offs; (2) the existence of multiple channelsof contact among societies expands the range of policy instruments, thus limitinggovernments’ control over foreign relations; and (3) military force is largelyirrelevant. Table 2.1 of Power and Interdependence (p. 37) lists five sets of politicalprocesses that we expect to be different under conditions of complex interdependencefrom what they would be under realist conditions. These include the goals of actors,instruments of state policy, agenda formation, linkages of issues, and roles of interna-tional organizations.

A methodological problem immediately arises. Since we define complexinterdependence in terms of the goals and instruments of state policy, any generalarguments about how goals and instruments are affected by the degree to which asituation approximates complex interdependence or realism will be tautological.Thus our propositions about political processes must be limited to issue linkage,agenda formation, and the roles of international organizations. Since, as we haveseen, discussions of linkage are as relevant to a realist world as to one of complexinterdependence, we are left essentially with two dependent variables: changes inagendas and changes in the roles of international organizations. Ideally, we wouldhave provided qualifying statements specifying the conditions under which agendaschange and international organizations are important. How much progress is actuallymade on these questions?

Chapter 5 discusses both processes. We argue that agenda change results from“poor operations of a regime in a coherent and functionally linked issue area”(p. 121). But we do not specify any model of agenda change that would permit anobserver to anticipate when it would occur, and in what direction. Richard W.Mansbach and John A. Vasquez later made an interesting contribution to theunderstanding of agenda change by presenting their view of an “issue cycle,involving genesis, crisis, ritualization, dormancy, decision making and authoritativeallocations.”22 As in most models of stages, the causal processes at work were notclearly specified by Mansbach and Vasquez—as they point out, the issue cycle is


more a framework for analysis than a theory. Nevertheless, it goes beyond the briefobservations about agenda change in Power and Interdependence.

We had more to say about international organizations, partly because of our“international organization model,” and partly because of our earlier work.23 Weviewed international organizations not as sources of definitive law but as institution-alized policy networks, within which transgovernmental policy coordination andcoalition building could take place. We observed that in oceans politics,international organizations seemed to have a greater effect on states’ agendas andinfluence over outcomes than on international monetary relations. This perspectiveon international organizations as facilitators rather than lawmakers has held up wellin the intervening decade. Such organizations have proliferated, and the activities ofa number of them, such as the International Monetary Fund, have expanded—butthey have shown little tendency to develop genuinely supranational capabilities.Keohane’s After Hegemony integrates this view of international organizations into abroader theory of international regimes.

In the interest of parsimony, we limited our analysis in Power andInterdependence to the level of the international system: it was essential, in our view,“to know how much one can explain purely on the basis of information about theinternational system” (p. viii). We admitted the importance of factors at thedomestic level but sought first to sort out the systemic forces at work.24 As a result ofthis decision, we had to view interests as formed largely exogenously, in a wayunexplained by our theory. Thus, domestic politics and the impact of internationalrelations on domestic politics—what Peter Gourevitch later called “the secondimage reversed”—were ignored.25 Yet changes in definitions of self-interest, by theUnited States and other countries, kept appearing in our case studies—both inoceans politics and monetary relations—without adequate explanation.

An example of this difficulty appears in Chapter 5, which describes the extentto which the ideal type of complex interdependence is approximated in themonetary and oceans issue areas and concludes that its applicability is greater inthe latter. From a realist perspective, this evidence might suggest that processes ofcomplex interdependence are irrelevant to issues of great importance for states (suchas monetary policy). Furthermore, within the oceans issue area, processes ofcomplex interdependence have been viewed by many observers as shrinking ratherthan expanding since 1977. (The United States’ refusal to sign the Law of the SeaConvention reinforced this perception.) Yet such a quick dismissal of complexinterdependence as trivial would be too simple. The original American position infavor of narrow coastal jurisdiction and sharing of seabed resources had beendetermined by the U.S. Navy on the basis of security interests. But the Navy’sposition was defeated by transnational and transgovernmental coalitions in thecontext of the Law of the Sea conferences. The United States changed its prioritiesbefore it refused to sign the treaty. For realists to say that the United States refusedto sign because of “self-interest” begs the critical question of how such interests aredefined and redefined.

Our failure to theorize about the domestic politics of interest formation hadparticularly serious effects on our analysis of the politics of complex interdependence as

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defined in terms of the goals and instruments available to governments. Understandingchanges in complex interdependence must necessarily involve understanding changesin priorities among state objectives, which could only be achieved through an analysisof relationships between patterns of domestic and international politics. Furthermore,the characteristic of “multiple channels of contact” means that states are not unitaryactors—that is, the sharp boundary between what is “domestic” and what is “systemic”breaks down. It is not difficult to see how our acceptance for research purposes ofthe system-unit distinction weakened the prospects for a deeper analysis ofcomplex interdependence. The concept was left hanging—intriguing to some,misunderstood by many, and incapable of being developed without relaxing thesystemic perspective whose theoretical parsimony is so highly valued by studentsof international relations.

International Regime ChangeThe alacrity with which the concept of international regimes has been accepted inthe international relations literature contrasts sharply with the relative neglect ofcomplex interdependence. The concept of international regimes has proven itsvalue, identifying and clustering together the important phenomena to beexplained. It has served as a label for identifying patterns of what John Ruggie called“institutionalized collective behavior”26 on a variety of subjects. And it has beenextended to include the analysis of international security issues.27 Indeed “regimes”seem now to be everywhere!

Although Power and Interdependence did not introduce the concept of interna-tional regimes, it showed how the concept could be used in systematic empiricalanalysis and therefore promoted its widespread employment as a descriptive device toencompass clusters of rules, institutions, and practices. Furthermore, it advanced fourmodels of understanding regime change. During the last ten years, a large body ofliterature on regimes has followed this line of analysis, which Ruggie pioneered andwhich we sought to extend. Much of this work has tried to test the theory ofhegemonic stability—associating a decline in international regimes with erosion ofAmerican hegemony during the last quarter century. The result of this work, onbalance, has been to increase skepticism about the validity of the hegemonic stabilitytheory. But the literature on international regimes has not been limited to testing thetheory of hegemonic stability: characteristics of international institutions, domesticpolitics, and learning by elites, as well as shifts in relative power capabilities, canaccount for the nature of international regimes or for changes in them.

During the last decade, research on international regimes has made substantialprogress. A wide consensus has been reached on a definition of international regimesas principles, rules, norms, and procedures around which expectations can convergein a given area of international relations.28 Problems exist in operationalizing thisdefinition: in particular, when the concept of international regime is extendedbeyond the institutionalized results of formal interstate agreements, the boundariesbetween regime and nonregime situations become somewhat fuzzy.29 Most empiricalwork on regimes, however, deals with the results of formal interstate agreements and


is therefore immune to the charge of operational obscurity sometimes raised againstthe concept in general.

Questions of definition and operationalization aside, much has been learnedfrom this empirical work about how and why international regimes change—inparticular, about conditions under which cooperation is facilitated, and about whygovernments seek to establish, and are willing to conform to, the rules of regimes.30

Furthermore, policymakers—not only from Western countries but from the SovietUnion as well—have begun to think and talk about international cooperation interms of international regimes.31

Nevertheless, our understanding of international regimes remains rudimentary.Although we have a clearer idea now than in 1977 of how and why internationalregimes change, we do not have well-tested empirical generalizations, much lessconvincing explanatory theories of this process. Nor are we likely to have suchtheories of change without better incorporation of domestic politics into ourmodels. The nature of international regimes can be expected to affect domesticstructures as well as vice versa: the flow of influence is surely reciprocal betweeninternational institutions and bargaining on the one hand and domestic politics onthe other. Although social scientists can understand some aspects of the operationof international regimes on the basis of stylized systemic theories that are indebtedto microeconomics, we are unlikely, without close investigation of domestic politics,to understand how states’ preferences change. Yet as long as we continue to regardpreferences as exogenous, our theories will miss many of the forces that propelchanges in state strategies and therefore in the patterns of international interaction.

We know too little about the effects of international regimes on state behavior.Indeed, students of international regimes often simply assume that regimes make adifference because they can alter actors’ calculations of their interests or changetheir capabilities.32 This assertion has been elaborated but not rigorously tested.Power and Interdependence made some observations about how regimes can altercapabilities, making use of the concept of “organizationally dependent capabilities”(p. 55); later work has focused on the impact of regimes on the self-interests ofgovernments, and therefore on state strategies.33 According to this argument, theprinciples, rules, and institutions of a regime may have two effects on strategies.First, they may create a focal point around which expectations converge, reducinguncertainty and providing guidelines for bureaucrats about legitimate actions andfor policymakers about feasible patterns of agreement. In the long run, one may evensee changes in how governments define their own self-interest in directions thatconform to the rules of the regime. Second, regimes may constrain state behavior bylimiting access to decision-making and by prohibiting certain actions. Since regimeshave little enforcement power, powerful states may nevertheless be able to takeforbidden measures; but they incur costs to their reputations, and therefore to theirability to make future agreements.

Arguments such as these emphasize that regimes can be understood within ananalytical framework that stresses self-interest: states may conform to the rules andnorms of regimes in order to protect their reputations. But neither these works norother works on regimes have established to what extent, and under what conditions,

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the impacts of regimes on state interests are significant enough to make muchdifference in world politics. Our relatively poor understanding of the impact ofregimes provides opportunities for future research. In particular, we need morecareful empirical work, tracing the behavior of states to see how closely policiesfollow regime principles, rules, and institutions. Yet this is only a first step, since ifour attention remains focused on the level of the system, it may be very difficult foran investigator to ascertain the causal status of the regime—perhaps the stateswould have followed similar policies in the absence of the regime; or regimes couldmerely reflect interests, without exerting any impact of their own.

To ascertain the impact of the regime, we must trace internal decisionmakingprocesses to discover what strategies would have been followed in the absence ofregime rules. We could seek to identify issues on which regime rules conflicted withthe perceptions of self-interest held by governments (apart from the regime)—whatKeohane has called “myopic self-interest.”34 We would then ask whether thereputational and other incentives to abide by regime rules outweighed theincentives to break those rules. How much impact did the regime rules have? Onlyby examining internal debates on such issues could the analyst go beyond theself-justificatory rhetoric of governments (which is likely to exaggerate their respectfor regimes) to the factors affecting their decisions. If this sort of research werecarried out on a number of issues involving fairly well-established internationalregimes in which the governments under investigation had a range of moderate tosubstantial incentives to violate the regime rules, we might learn quite a bit aboutthe efficacy of international regimes. And if the research examined how decisionswere made to strengthen or enlarge the scope of regime rules over a substantialperiod of time in a given issue area, it could help to test the notion that regimesthemselves help to promote their own growth. It might even yield some insightsabout the question of whether international regimes help to change governments’definitions of their own self-interests over time.

Admittedly, work has been done on national decisions and internationalregimes (although not explicitly designed as we have suggested); this work indicatesthe relative weakness of regimes in situations involving high incentives to break therules.35 However, the fact that governments conform to most regimes most of thetime suggests that regimes do indeed perform a coordinating function—but it tells uslittle about their efficacy in altering incentives through effects on governments’reputations or in other ways. We need studies examining a wider range of incentivesbefore we will have a better idea of regimes’ efficacy in situations involving differentamounts of stress. Little such work has yet been done, but the impact of pioneeringresearch along these lines could be substantial.36

In studying changes in international regimes, structural theory remains useful:its very simplifications highlight how self-interest can be consistent with theformation and maintenance of international institutions. But structural theoryshould not be equated with systemic theory, since systems incorporate not onlypower structures but political processes, including regularized patterns of practicewhich we refer to as institutions. Yet these processes are intertwined with domesticpolitics: once one recognizes the significance of these processes, it becomes clear

3. Limitations of Structural Theory: Systemic Political Processes 275

that systemic theory alone will be insufficient either to explain changes in interna-tional regimes over time or to account for their impact on policy. Both structuraltheory and the broader process-oriented version of systemic theory that we sought todevelop in Power and Interdependence are therefore inadequate by themselves. Whatresearchers must now do is to link a process-oriented version of systemic theoryclosely with an analysis of domestic politics without suffering the loss of theoreticalcoherence that advocates of systemic theory have always feared.

3. LIMITATIONS OF STRUCTURAL THEORY: SYSTEMICPOLITICAL PROCESSES

Although we acknowledged the importance of domestic politics, in Power andInterdependence we assumed that we could learn a good deal about world politics byhaving more subtle and sophisticated understanding of the international system.We argued that systems have two dimensions: structure and process. We used theterm “structure” in the neorealist sense to refer principally to the distribution ofcapabilities among units.37 “Process” refers to patterns of interaction—the ways inwhich the units relate to each other. To use the metaphor of a poker game, thestructure refers to the players’ cards and chips, while the process refers to the relationships among the formal rules, informal customs or conventions, and thepatterns of interaction among the players. Variations in the ability of the players tocalculate odds, infer the strength of opponents’ hands, or bluff are at the unit, oractor, level.

The processes that take place in a system are affected by its structure and by thecharacteristics of the most important units in the system. The preferences of thestates predispose them toward certain strategies; the structure of the system pro-vides opportunities and constraints. One needs information about preferences aswell as about structure to account for state action. For example, it is not enough toknow the geopolitical structure that surrounded Germany in 1886, 1914, or 1936;one also needs to know whether German strategies were the conservative ones ofBismarck, the poorly conceived ones of the Kaiser, or the revolutionary ones ofHitler. Yet even if we understand both state preferences and system structure, wewill often be unable to account adequately for state behavior unless we understandother attributes of the system, such as the character of international and transna-tional interactions and the nature of international institutions.38 Examining thesesystemic processes leads the investigator to look more carefully at the interactionsbetween system and unit characteristics—for example, to examine how actors’preferences are affected by the constraints and opportunities in their environments(and vice versa). That is, focusing on systemic processes directs our attention to thereciprocal connections between domestic politics and international structure—andthe transmission belts between them.

Clearly there is a great deal of variance in international political behavior thatis not explained by the distribution of power among states. Neorealists do not denythis but assign all other determinants to the unit level.39 This response, however, is

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not satisfactory. Factors such as the intensity of international interdependence orthe degree of institutionalization of international rules do not vary from one state toanother on the basis of their internal characteristics (unlike the degree to whichdemocratic procedures are followed internally, or whether the domestic politicaleconomy is capitalist or socialist). These are therefore not unit-level factorsaccording to Waltz’s earlier definition. Furthermore, making the unit level thedumping ground for all unexplained variance is an impediment to the developmentof theory. Not only does it complicate the task of analysis by confusing unit-levelfactors (such as domestic political and economic arrangements) with international-level factors; it also leads some neorealist analysts to forego the opportunity totheorize at a systemic level about nonstructural determinants of state behavior.

These nonstructural systemic factors affecting state strategies can be placed intotwo general categories: (1) nonstructural incentives for state behavior, and (2) theability of states to communicate and cooperate. Nonstructural incentives presentopportunities and alter calculations of national interest by affecting expected ratiosbetween benefit and costs or risks, without affecting the distribution of power amongactors. For instance, increases in the destructiveness of weaponry may produce incen-tives for states not to engage in warfare, even if the distribution of military powerresources between them is not altered by these technological advances. Or reductionsin transportation costs may increase trade benefits and therefore encourage policiesof greater economic openness, without altering either the relative bargaining powerof the actors or the differences among them at the unit level.

The ability to communicate and cooperate can provide opportunities for theredefinition of interests and for the pursuit of strategies that would not be feasible ifthe only information available to states were about other states’ preferences andavailable power resources. Just as allowing players in Prisoners’ Dilemma to commu-nicate with one another alters the nature of the game, so also institutions thatincrease the capability of states to communicate and to reach mutually beneficialagreements can add to the common grammar of statecraft and thus alter the results.40

To return to our poker metaphor, the size of the pile of chips in front of each playermatters, but so does whether they agree on the nature and the rules of the game.

Liberals have traditionally emphasized these two aspects of systemic process—non-structural incentives and variations in the capacity to communicate and cooperate. Forexample, liberal theorists have stressed (with different degrees of sophistication) theways in which gains from trade and economic incentives may alter states’ behavior.Similarly, liberal theorists often stress the effects of increased transnational (and trans-governmental) contacts on attitudes and communication. And, of course, the role ofinstitutions and norms has always been a preeminent part of liberal theory. All thesethemes were prominent in integration theory between the late 1950s and early 1970s.They are necessary components of a systemic conception of international relations, lest“system” should become equated with only one of its aspects, system structure—amistake Waltz makes.

This is not to say that liberals have a monopoly on thinking about systemicprocesses. Technological changes, for instance, are central to realist thought evenwhen they do not alter the distribution of power. Nor do we argue that all factors

3. Limitations of Structural Theory: Systemic Political Processes 277

emphasized by liberal theory belong at the systemic level. But we do contend thatadding the process level to the concept of structure in defining international systemsenriches our ability to theorize. This emphasis on process as well as (rather thaninstead of) structure moves us toward a synthesis of, rather than a radical disjunctionbetween, realism and liberalism. Neorealism is appropriate at the structural level ofsystemic theory; liberalism is most fruitful at the process level. We aspire to combinethem into a system-level theory that incorporates process as well as structure.

This approach toward a synthesis of neorealist and liberal theories does raise adanger of tautological reasoning. If dependent variables are vaguely defined as“how nations behave” and the system-level process is how they behave, thetautology involved in “explaining” behavior by reference to process is evident. Toguard against this, dependent variables must be defined carefully in terms ofspecific behavior. In addition, a clearly delineated typology of the causal elementsinvolved at the process level—in terms of factors altering nonstructural incentivesand affecting the ability to communicate and cooperate—is also needed.Technological change, economic interdependence, and issue density are amongthe forces affecting nonstructural incentives.41 The characteristics of interna-tional rules, norms, and institutions—“international regimes”—are crucial inaffecting ability to communicate and cooperate. Finally, the causal processes thatconnect forces affecting incentives and ability to cooperate and communicate onthe one hand, and behavior on the other, have to be traced: we cannot be satisfiedwith correlation alone.42

Any system-level analysis will necessarily be incomplete. As we have emphasized,to understand systemic processes such as those of complex interdependence, we needto know how domestic politics affects patterns of interdependence and regime formation.This entails a reciprocal comprehension of how economic interdependence andinstitutions such as international regimes affect domestic politics. Both structuraltheory and the broader process-oriented version of systemic theory that we sought todevelop in Power and Interdependence are inadequate by themselves.

Consider, for instance, the ability of states to communicate and cooperate.Although this depends, in part, on whether they agree on rules governing theirinteractions, it is also affected by the goals that states pursue; these goals are, in turn,affected by domestic politics. The classic distinction between status quo andrevolutionary goals is relevant to understanding the ability to cooperate.43 Whendeciding whether a stable or turbulent pattern of behavior exists, we must look at theways in which states’ formulation of their goals affects the process of the system.Changes in goals may arise from the domestic processes of a single state—witness theeffects of the French Revolution on the classical eighteenth-century balance ofpower. Changes in goals may also arise from transnational processes that affect thedomestic-politics and foreign-policy goals of a number of states simultaneously—witness the effects of the spread of democratization and nationalism on thenineteenth-century balance of power. To say that the nineteenth-century Europeansystem remained multipolar in its structure is true if structure is defined in a strictmanner, but the inability of this concept to account for change illustrates thenecessity of adding process to structure in the concept of system.44 Moreover, a focus

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on the systemic-process dimension of communication and cooperation enrichesresearch programs by directing attention to interactions between system- andunit-level changes.

Such a concern with the ways that state goals affect systemic processes (and viceversa) lets us look anew at questions of perception and learning. While these are notnew issues, they have had an ambiguous theoretical status as notable exceptions torealist arguments. Adopting a richer conception of system, involving both structureand process, brings perceptions and learning closer to the theoretical heart of thediscipline, and suggests the importance of sharpening our understanding of howpolitical organizations “learn.”

4. PERCEPTIONS AND LEARNING45

State choices reflect elites’ perceptions of interests, which may change in severalways. The most obvious is political change. An election, coup, or generationalevolution can lead to a replacement of leaders and thus bring in quite differentviewpoints about national interest. The change in “national interest” may notreflect new affective or cognitive views in the society at large. Rather the leadershipchange may reflect domestic issues or other factors unrelated to foreign policy.

Interests may also be redefined through normative change. Practices or intereststhat are accepted in one period become downgraded or even illegitimate in a laterperiod because of normative evolution. Changed views of slavery or colonialism areexamples.

National interest may also change through learning. In its most basic sense, tolearn is to alter one’s beliefs as a result of new information—to develop knowledgeor skill by study or experience. This is a spare definition and does not imply that thenew beliefs lead to more effective policies, much less to morally superior ones. Theadvantage of this definition is that learning can be identified without having toanalyze whether a given set of changes in beliefs led to “more effective” policies,whatever that would mean.

Yet this is not the only possible definition of “learning.” Indeed, learning is aslippery concept because it has many meanings. Confusion may derive from thenotion that “learning” implies improving the moral quality of one’s behavior. Butin ordinary usage, people can “learn” to do evil as well as good: to deviseblitzkrieg strategies, to build and employ offensive nuclear weapons, to commitgenocide. Social scientists who discuss learning need not identify it withmorally improved action.

A more serious confusion arises because, in social science, a broad definition oflearning coexists uneasily with the spare definition we have offered. In its broaderusage, learning carries the connotation of an increased ability to cope effectively withone’s environment. It is marked by a shift from overly simple generalizations to“complex, integrated understandings grounded in realistic attention to detail.”46

Ernst B. Haas, who has been the leader in advocating the importance of learning fortheories of international relations, sees learning occurring internationally when

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states “become aware of their enmeshment in a situation of strategic interdepend-ence.”47 When learning occurs, “new knowledge is used to redefine the content ofthe national interest. Awareness of newly understood causes of unwanted effectsusually results in the adoption of different, and more effective, means to attain one’s ends.”48

If we define learning to include more effective attainment of one’s ends, newdifficulties for research arise. In a complex realm such as international politics, wemay not be able to determine, even some time after the event, whether such “learn-ing” took place. Misread “lessons of history” and inappropriate analogies have oftencaused leaders to fail to attain their goals.49 Did the lesson Harry S Truman learnedfrom the experience of Munich—that aggression had to be stopped regardless ofwhere it took place—make him more or less able to make wise decisions whenNorth Korea attacked South Korea in June, 1950? Did the lessons American policy-makers learned during the Korean War about the dangers of Chinese interventionmake them more effective decision makers when American military forces were sentto Vietnam in the mid-1960s? When critics of arms control in the 1970s learnedthat the Soviets would not simply imitate United States strategic force structure,did they become more or less able to protect American security and world peace duringthe Reagan administration? In each case, beliefs were altered as a result of experi-ence, and policymakers became increasingly aware of the networks of strategic inter-dependence in which they were enmeshed. Whether valuable knowledge or skillwas acquired, enabling them to act more effectively, remains a matter of controversy.

In conducting research on learning in international relations, we must specifywhich definition of learning we are using. We believe that it clarifies thinking tobegin with the spare definition—alteration of beliefs through new information—since learning, thus defined, can be identified relatively easily. As Haas suggests, oneform of such learning is increasing awareness of strategic interdependence. Thequestion of under what conditions such learning leads to more effective goal attain-ment then becomes an empirical and theoretical question, as it should be, ratherthan a definitional one.

When we analyze governmental learning, we have to consider complexities oforganizational, political, and psychological processes. Policy-relevant learning is anorganizational as well as a psychological phenomenon. Shifts in social structure andpolitical power determine whose learning matters. Furthermore, organizations musthave an institutional memory and socialization procedures if lessons learned by onecohort are to be assimilated by another. A critical question for research is how dif-ferent sets of elites perceive and redefine the constraints and opportunities of theinternational system and the appropriate goals and means of states. Why did Ottovon Bismarck, Kaiser Wilhelm, and Adolf Hitler define such different interests andopportunities for Germany? Why did Presidents Wilson and Coolidge defineAmerican interests in Europe so differently—and why was Franklin D. Roosevelt’sview on this issue so different in 1940, or even 1936, than it was in 1933? To whatextent are interests redefined because of systemic or domestic changes? How muchare interests redefined because leaders and their supporting coalitions change, orbecause the views of people who remain in power change? And if the latter, to what

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extent do the transnational contacts and coalitions stressed in liberal theoriescontribute to the learning that we observe?

A key question for future research concerns the impact of international politicalprocesses on learning. Some learning is incremental and continuous. Incrementallearning occurs when bureaucracies or elites come to believe that certain approacheswork better than others for their purposes. International regimes probably play asignificant role in incremental learning because in such settings they can (1) changestandard operating procedures for national bureaucracies; (2) present new coalitionopportunities for subnational actors and improved access for third parties; (3)change the attitudes of participants through contacts within institutions; (4)provide information about compliance with rules, which facilitates learning aboutothers’ behavior; and (5) help to delink one issue from others, thus facilitatinglearning within specialized groups of negotiators. Some learning, by contrast, resultsfrom large discontinuous events or crises such as Munich, the Great Depression, orthe invasion of Afghanistan. Even crisis-induced learning may be facilitated byinstitutions; these institutions may include international regimes, domestic politicalparties, or bureaucracies. Contact facilitated by international regimes—amonggovernments, and between governments and international secretariats—may helpspread a common interpretation of large events. Whether learning is incremental ordiscontinuous, therefore, regimes may play a role by creating, altering, or reinforcinginstitutional memories. The principles and norms of regimes may be internalized byimportant groups and thus become part of the belief systems which filter informa-tion; and regimes themselves provide information that alters the way key partici-pants in the state see cause-and-effect relationships.

Cooperation can occur without regimes or even overt negotiation. Axelrod hasshown that it can evolve as actors define their self-interests and choose newstrategies in response to others’ strategies of reciprocity.50 Furthermore, there is noassurance that rules and institutions will promote learning or that, if they dopromote learning in one part of a relationship, the learning will spill over benefi-cially into other areas. But looking at international politics in terms of regimes doessuggest fruitful avenues of exploration and important questions that are not alwayscaptured by the usual approaches. Why has learning been faster in some areas andslower in others? When has learning led to the development of institutions, such asinternational regimes, and when has it not? What difference do such institutionsmake? To what extent are domestic factors facilitating or impeding learning affectedby international regimes? Can societies take advantage of crises to create newregimes at crucial moments, thus institutionalizing learning?51 We do not know theanswers to these questions—but the answers matter.

CONCLUSION

The research program suggested by Power and Interdependence has been, in our view,a fruitful one. Although we as well as others have occasionally been guilty ofexaggeration, stereotyping of opposing views, and vagueness about some of our own

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theories or evidence, the program we helped to develop has stimulated useful furtherresearch. It is now conventional to analyze interdependence as a political, as well asan economic, phenomenon and to examine patterns of interdependence by issuearea. The conceptions of bargaining and linkage used by political scientists havebecome more sophisticated and more sensitive to contextual variations and thelimited fungibility of power resources. The concept of international regimes hasfostered research on the evolution of rules and institutions in world politics, and, tosome extent, on the impact of such rules and institutions on state behavior. There isa widespread (although not universal) view among scholars that structural realism,or neorealism narrowly interpreted, is inadequate as an explanatory framework forcontemporary world politics.

Yet there have been failures as well as successes in this research program. Itseems difficult to understand changes in regimes and in state policies without havinga theory of learning; yet the very concept of learning remains ambiguous, and noone has developed a coherent theory of learning in international politics.Furthermore, less has been done with the liberal than the realist half of ourattempted synthesis. We have only partially incorporated the liberal emphasis oninstitutions, interdependence, and regularized transnational contacts into a sophis-ticated, systematic analysis of process and structure in world politics. The concept ofcomplex interdependence has been bypassed or misinterpreted; in particular, wehave paid too little attention to how a combination of domestic and internationalprocesses shapes preference. The need for more attention to domestic politics, andits links to international politics, leads us to believe that research at the systemiclevel alone may have reached a point of diminishing returns.

We need to concentrate now on the interplay between the constraints andopportunities of the international system, including both its structure and itsprocess, and the perceptions of interests held by influential actors within states. Weneed to examine how conceptions of self-interest change, as a result of evolvinginternational institutions, individual or group learning, or domestic politicalchange. This effort will require dynamic analysis, buttressed by detailed empiricalresearch; and it will entail the further blurring of boundaries between the fields ofinternational relations and comparative politics. For those willing to take up thechallenge, the next decade could be an exciting time for scholarship.

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In a unique moment of history after World War II, the United States found itselfwith an unprecedented power to create rules and organizations—internationalregimes—that laid down a global framework for international relations whileprotecting American economic and security interests. Largely because of U.S.enthusiasm, such international regimes as the United Nations, the InternationalMonetary Fund (IMF), the World Bank, and the General Agreement on Tariffs andTrade (GATT) were born. Amid this burst of institutional creativity, publicistsspoke of entering “the American Century.”

The national mood has shifted. International organizations now seem to somelike the sorcerer’s apprentice—out of control. Jeane Kirkpatrick, then U.S.permanent representative to the United Nations, voiced this view in theJanuary–February 1983 issue of Regulation magazine:

U.N. agencies . . . are the scene of a struggle that we seem doomed to lose.Regulation is the instrument for the redistribution of what is called the world’swealth. The international bureaucracy functions as the “new class” to whichpower is to be transferred. Global socialism is the expected and, from the pointof view of many, the desired result.

The United States has been sharply criticized in the United Nations and hasresponded in kind. It has withdrawn from the U.N. Educational, Scientific andCultural Organization (UNESCO) and has considered quitting the Food andAgriculture Organization (FAO) and the U.N. Conference on Trade and Development.“Global unilateralists” celebrate the U.S. ability to pursue policies on its own, outside ofinternational organizations and unhampered by demands or complaints from abroad.

Two Cheers forMultilateralism*

*Robert O. Keohane and Joseph S. Nye, “Two Cheers for Multilateralism.” Reprinted with permissionfrom Foreign Policy 60 (Fall 1985). Copyright 1985 by the Carnegie Endowment for International Peace.

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For the Reagan administration in 1981, the United States was accepting too muchgovernmental intervention disguised as international policy coordination. It viewedinterest- and exchange-rate regulation as the job of the market and the IMF as a self-aggrandizing international bureaucracy. Increasing energy production at home was con-sidered more important than strengthening the International Energy Agency (IEA)and its procedures for international policy coordination. Halting the proliferation ofnuclear weapons, candidate Ronald Reagan once contended, was not “any of our busi-ness.” An imperfect draft Law of the Sea Treaty could be safely abandoned. The admin-istration’s solution was not a more vigorous effort at multilateral cooperation, but arecovery of lost military strength and U.S. assertiveness.

“Standing up for America” in international institutions is popular domesticpolitics and also, in some situations, correct policy. Senator Daniel Moynihan(D.-New York) rightly argued when he was U.S. permanent representative to theU.N. a decade ago that, unless answered, rhetoric in the General Assembly grad-ually would shape the agenda of world politics. Withdrawal may be the only wayto nudge errant organizations like UNESCO on to a more pragmatic course. Yetthe United States faces a problem: Neither toughness nor unilateralism alone candeal effectively with complex problems that require international cooperation,often in the form of international organization, for their solution.

Indeed, more interesting than the Reagan administration’s initial resistance tointernational policy coordination and institution building was its return to more tra-ditional policies in the face of reality. A world in which Mexico or Brazil mightdefault on massive debts to U.S. banks proved too risky to America’s financialhealth. Keeping the world safe for capitalism turned out to require the interventionof an important international organization called the IMF, whose resources theadministration, in a shift of policy, tried to persuade Congress to increase. Likewise,in another shift of policy, the administration, as it thought through the implicationsfor U.S. security of a spread of nuclear weapons, moved to maintain the nonprolifer-ation regime created by earlier administrations. When the Iran-Iraq war raised theprospect that the Persian Gulf might be closed, administration planners lookedmore sympathetically at the emergency coordination role of the IEA.

The Reagan administration’s grudging acceptance of modest internationalismillustrates the impossibility of any return to unilateralism as the guiding principle ofU.S. foreign policy. Even officials who expect little from international institutionsdiscover their value in achieving American purposes. Self-interest in an interdependentworld, rather than a desire to improve the world or an ideology of collectivism,accounts for this change of heart. Unilateralism may lead to occasional foreign-policytriumphs, but it is an inadequate answer to a host of problems that cannot be addressedexcept through international cooperation.

Unfortunately, acceptance of this point does not advance U.S. foreign policy veryfar. For the key issue is not belated reliance on the regimes and institutions that exist,but future improvement of those regimes and institutions so that the national interestsof participating states will be better served. Acceptance by the Reagan administrationof the value of international institutions remains tainted by its fears of the collectivisticand shared-wealth doctrines that emanate from international meetings. These fears

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prevent the administration from thinking strategically about international regimes.Strategic thinking means focusing on a key question that is rarely addressed in currentpolicy debates: What patterns of international cooperation should the United Stateswish to establish in a fragmented, heterogeneous world?

Because foreign policy by nature involves responding flexibly to unexpectedand contradictory events, it benefits little from detailed blueprints for action in thedistant future. Yet without a strategic view, tactics cannot be placed in perspective:Flexible responses to contradictory events will run an administration around incircles. One element of a long-term strategy is contingency planning so thattactical opportunities can be seized. Long-range planning that bars innovativeresponses to new events becomes a destructive exercise, but a purely tacticalapproach that ignores the impact of policy choices on the structure and institutionsof world politics may waste significant opportunities to alter the framework withinwhich the United States can cooperate with other countries.

THE NEED FOR REGIMES

Clear thinking about the roles of international institutions is possible only ifAmericans accept that so long as they live in a world of sovereign states, internationalgovernance will not look much like domestic governance. Even viewed over a 40-yearperiod, despite the fears of conservatives, U.N. members are not advancing slowlytoward world government. Nor should international governance be equated with thevarious institutions of the United Nations, in which some see only virtues and othersonly flaws. The U.N. system is only part of the complex set of rules and institutionsthat affects how states manage their interdependent relationships. Internationalregimes—the rules and procedures that define the limits of acceptable behavior onvarious issues—extend far beyond the scope of the United Nations. Regimes ofteninclude formal organizations, but are not limited to them. Regimes are institutions ina broader sense: recognized patterns of practice that define the rules of the game.

Like the famous character from Molière’s comedy Le Bourgeois Gentilhomme whodid not realize that he spoke prose, the public is often unaware that governmentsexist in a world of international regimes. Regimes vary greatly in their scope andmembership. They deal with subjects ranging from debt and exchange rates to whal-ing and the status of Antarctica; from the spread of trade barriers to the spread ofnuclear weapons. Some are open to all states; others are regional. Many are limitedto countries similar in capabilities or interests. Not one, however, can impose its willon members, although governments wishing to receive the benefits of some regimesmust accept restraints on their domestic or international behavior. In short, regimesfacilitate the cooperative pursuit of governments’ objectives. They do not substituteabstract, common interests for national interests.

Small states often welcome international regimes as barriers to arbitrary abuse ofpower by the strong. But regimes can be equally valuable to great powers, such as theUnited States, that want to create, but are unable to dictate, the terms of a stableworld environment.

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In recent decades, for example, regimes have served U.S. interests by helpingto inhibit the spread of nuclear weapons, to limit trade protectionism, and toorganize the rescheduling of loans to less-developed countries (LDCs). TheNon-Proliferation Treaty (NPT), opened for signature in 1968, and the U.N.International Atomic Energy Agency (IAEA), created in 1957, are not the onlyreasons that nuclear weapons have spread so slowly—to less than one-thirdthe number of countries predicted by President John Kennedy in 1963. Yet theexistence of an international regime discouraging proliferation has greatlyaided American policy in this area and has made the world a safer place. During thelast decade, GATT has not kept liberalism in trade from weakening under thepressures of economic distress and rapid changes in comparative advantage. Butreflections on what happened in the 1920s and 1930s suggest that without thisessentially liberal regime, trade protectionism might well be spiraling out of control.And the fact that the recent debt crisis of LDCs has not turned into a world finan-cial crash is due largely to elaborate international, transnational, and intranationalarrangements permitting the rescheduling of debts and providing incentives forbanks to continue to make loans to LDCs.

Not all regimes, of course, contribute so effectively to the management ofcollective problems. Some regimes enjoy less consensus than others. But those thatwork well characteristically perform at least four valuable functions.

First, regimes facilitate burden sharing. Often governments will contribute to acollective objective only if others do the same. Further, other states find it harder toevade their obligations when a great power can point to clear rules and procedures.Regimes establish standards that can be applied to all states, large or small.

Second, regimes provide information to governments. Shared information,particularly on issues that easily cross national boundaries—such as controllingthe spread of communicable diseases, allocating telecommunications frequencies,and limiting pollution of the atmosphere and the oceans—is essential for effectiveaction. Information encourages cooperation on other issues by governments thatmight otherwise act unilaterally. And where information reveals substantialshared interests, important agreements may result. International regimes makegovernment policies appear more predictable, and therefore more reliable. Thusthe IEA, by monitoring international oil stocks and planning for emergencies,may reduce competitive panic buying by governments and firms. Althoughunsuccessful in this task in 1979, it may well have played a positive role in 1980.1

Regimes also may provide information indirectly—for example, by givinggovernment officials access, through negotiations and personal contacts, to eachother’s policymaking processes. Policymakers involved in debt negotiations, then,know not only each other’s policies, but also each other: Through this personalcontact, they can anticipate more confidently their partners’ reactions tohypothetical future events.

Third, regimes help great powers keep multiple and varied interests from gettingin each other’s diplomatic ways. As interdependence ties issues together, countriesbecome more likely to trip over their own feet. The United States discovered morethan 50 years ago that reciprocal trade agreements with one country could harm

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trade with many others; it was becoming impossible to deal effectively with eachissue except in a framework of rules (institutionalized in unconditionalmost-favored-nation treatment) within which particular negotiations could becarried on. Likewise, in 1945 the United States unilaterally proclaimed its decisionto exercise jurisdiction over fishing and offshore oil activities near U.S. coasts; anescalating series of contradictory demands by other countries for control of a widevariety of ocean resources was the result. Well-designed regimes introduce someorder into such situations by clustering issues under sets of rules.

Finally, international regimes introduce into U.S. foreign policy greaterdiscipline, a quality most critics believe it needs in greater measure. Thus, interna-tional rules help reinforce continuity when administrations change. And they setlimits on constituency pressures in Congress. For example, domestic vintnersrecently sought to exclude European wines. U.S. wheat farmers, worried aboutretaliation, were able to defeat this move and buttressed their position by referringto the rules of GATT.

In short, regimes usually are in America’s interest because the United States isthe world’s foremost commercial and political power. If many regimes did notalready exist, the United States would certainly want to invent them, as it did.

UNREALISTIC VISIONS

Seven maxims may help the United States develop an effective strategic approachto international regimes.

Do Not Try to Recapture the PastNostalgia for a simpler, more neatly arranged world leads Americans periodically topropose “grand designs” to solve foreign-policy problems. But postwar visions arenow unrealistic. The U.N. General Assembly, with its one state, one vote rule, isnot sufficiently amenable to American influence to be a reliable instrument offoreign policy. And policymakers’ recent dreams of a “new Bretton Woods” meetingor of a large conference to rewrite and strengthen the NPT might make mattersworse. Even during the period of American dominance, universalistic approacheswere often unsuccessful: Myths to the contrary, numerous doctoral dissertationshave established that the United States did not have an “automatic majority” in theGeneral Assembly, even during the period before the entry of so many Third Worldstates. The diffusion of power that has taken place in recent years makes large-conference diplomacy even more unwieldy than before and therefore more likely todisappoint. The number of contradictory demands often destroys all possibility of asatisfactory resolution, as the troubled outcome of the Law of the Sea Conference,after more than a decade of effort, demonstrates.

In today’s world, universal international organizations are more valuable assounding boards than as decision-making bodies. If the United States listenscarefully, but not naively, these organizations may tell it something about the

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intensity of, and shifts in, others’ views. These forums do influence the agenda ofworld politics. They may legitimate important decisions reached elsewhere (anexample would be some of the arms control treaties negotiated by the United Statesand the Soviet Union and subsequently blessed by a General Assembly vote). Butonly rarely are universal international organizations likely to provide the world withinstruments for collective action.

Ask Whether the World Really Needs ItRegimes are needed only when uncoordinated behavior by governments has muchworse results than coordinated action. Issues lacking serious conflicts of interest mayneed very little institutional structure. Some international problems are more likethe question of whether to drive on the left or the right side of the road than like theissue of which car goes first at an intersection. Once a society has decided on whichside cars will drive, practice becomes largely self-enforcing. No one but a suicidalmaniac has an interest in deviating from the agreement. Many international regimesare similarly self-enforcing—for example, arrangements for delivery of letters, thelocation of shipping lanes, or specification of which languages will be used ininternational air traffic control. No one, after all, has an interest in sending mail tothe wrong place, inviting collisions by using the wrong shipping lanes, or suddenlyswitching to French while landing in Chicago.

The more significant regimes, however, concern subject areas where eachgovernment would prefer that everyone cooperate except itself. For instance,when a country default seems likely, the common interest calls for a collectiveeffort to save the system. Nevertheless, it is in the interest of each bank to ceaselending or even to close out its loans to questionable borrowers. If each bank actsin this way, default is inevitable and the system will surely collapse. A coopera-tive regime governing bank lending is therefore desirable to the banks them-selves. Likewise, international arrangements for the security of energy consumersmay, as mentioned earlier, reduce incentives for countries to bid against oneanother for oil during a shortage. Regimes for debt and oil resemble the stoplightsneeded at busy intersections: Without rules, pursuit of self-interest by each leadsto disaster for all.

To incorporate explicit provisions for monitoring and enforcing rules, regimesthat are not self-enforcing usually require international organizations. Suchorganizations, however, do not have the capability themselves to enforce rules—thismust be done by governments—but rather only to exercise surveillance to identifydeviations from previous agreements and to engage in planning so that governmentswill be better prepared to cope with future emergencies. Often the most effectiveinternational organizations are surprisingly small. In 1980 the IMF had a staff ofonly 1,530 persons and GATT employed only 255 individuals.2 Yet the IMF andGATT arguably accomplish more than certain other international organizationswith more than twice the number of personnel, such as the International LaborOrganization, the FAO, and UNESCO. And they compare favorably with a numberof national bureaucracies as well.

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The key question is how well an international organization and the regime ofwhich it is a part structure incentives for governments. A sophisticated strategicapproach to international regimes does not assume that international bureaucraciesmust be large or directive. On the contrary, sometimes an international organizationcan be most effective by seeking to provide incentives for governments to rely moreon markets than on national bureaucratic management. The GATT trade regime,for example, expands the scope of market forces by restricting unilateral protection-ism by governments. The IMF stresses the role of market discipline in countries thatborrow heavily from it; in the 1970s it shifted from trying to help manage fixedexchange rates to a loosely defined role in a market-oriented system of flexible rates.International organizations are worthwhile only if they can facilitate bargainingamong member states that leads to mutually beneficial cooperation. They are notdesirable for their own sake.

Build on Shared InterestsTo flourish, regimes must enhance the goals of governments. On many issues,governments may regard their interests as so divergent that no worldwide agreementcan possibly be reached. Under these conditions, efforts to negotiate regimes arelikely to lead eventually to painful choices between poor agreements and negotia-tion failure. Deliberations on a new international economic order foundered on theheterogeneity of interests in the world—not only between rich countries and poorcountries, but within each of those groupings.

The collapse of various global negotiations, however, does not mean that theera of new regimes has closed. During the last decade a number of new institutionsand sets of rules affecting relations among the advanced industrialized countrieshave emerged. Examples include agreements on export credits negotiated during thelate 1970s, various codes agreed upon during the Tokyo Round of trade negotiations,and adaptations in the nuclear proliferation regime in the mid-1970s to establishsupplier guidelines for safer nuclear commerce.

These regimes and others, such as the International Energy Agency (IEA), havetwo key features. All these regimes were designed to resolve common problems inwhich the uncontrolled pursuit of individual self-interest by some governments couldadversely affect the national interest of all the rest. All these regimes were formed noton a universal basis, but selectively. The export-credit and nuclear-suppliers “clubs,”for example, include only countries that are major suppliers of credit or nuclearmaterial; the IEA deliberately excluded nonmembers of the Organization forEconomic Cooperation and Development.

When establishing smaller clubs, those participating must consider their effecton the larger regime. Nuclear suppliers, for example, were concerned thatformation of their group would exacerbate resentment among other adherents tothe nonproliferation regime. Yet sensitivity to issues of exclusion can help resolvethese problems. Once they had agreed on export guidelines in 1978, members ofthe nuclear suppliers group emphasized quiet, bilateral diplomacy in order tomaintain broad commitment to the nonproliferation regime.

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If a relatively small number of governments have shared interests in a givenissue greater than their differences, it can make sense to limit membership, or atleast decision-making power, to those countries. Sometimes, meaningful agreementscan be reached only by excluding naysayers. Every effort should be made, however,as in the GATT code, to allow for the eventual universalization of the regimes.Further, particular attention should be paid to the long-term interests of developingcountries, so that a legitimate desire to make progress on specific issues does not turninto a general pattern of discriminating against the weak.

A crazy quilt of international regimes is likely to arise, each with somewhatdifferent membership. Better some roughness around the edges of internationalregimes, however, than a vacuum at the center. Poorly coordinated coalitions,working effectively on various issues, are in general preferable to universalisticnegotiations permanently deadlocked by a diverse membership.

Use Regimes to Insure against CatastropheInsurance regimes are less satisfactory than effective regimes that control eventsand thereby eliminate adversity rather than simply share its burdens. It is better, otherthings being equal, to prevent floods by building dams than merely to insure againstthem. Likewise, IEA members would prefer to prevent oil embargoes than merely toshare diminished supplies in response to them. Yet in some situations, having adequateinsurance may deter hostile action by reducing the potential gains from “divide andconquer” strategies. And in any event, regimes that are able to control events oftencannot be constructed. When this is the case, insurance strategies may be better thanrelying on unilateral action or merely hoping for the best. In thinking about interna-tional cooperation, governments are often well advised to “elevate their sights a littlelower,” accomplishing what they can rather than bemoaning their inability to do more.

The Best Enforcement Is Self-EnforcementCentralized enforcement of rules in international regimes through hierarchicalarrangements is normally out of the question: There is no police force and only atiny international bureaucracy. If states are to comply with regime rules, they mustdo so on the basis of long-term self-interest.

Arranging enforcement is not so difficult as it may seem. The major advancedindustrialized countries deal with each other on a large number of issues over anindefinite period of time. Each government could “get away with” a particularviolation. But viable regimes rely, in one form or another, on the principle oflong-term reciprocity. No one trusts habitual cheaters. Over time, governmentsdevelop reputations for compliance, not just to the letter of the law but to the spiritas well. These reputations constitute one of their most important assets. As theeconomist Charles Kindleberger once remarked, “In economics bygones arebygones, but in politics they are working capital.”

Reciprocity is harder to institutionalize in multilateral settings than in bilateralsettings. It often is difficult to agree on “equivalent” contributions. When arguing

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with its NATO allies about burden sharing, for instance, the United Statesconcentrates on financial efforts, while European states stress contributions in kindthrough expropriated land or national service. Moreover, a tradeoff provided in onecontext may lead to demands for compensation from other countries or on otherissues. Nevertheless, the practice of reciprocity does provide incentives forcompliance, and in a well-functioning regime, standards exist to govern reciprocity.The subsidies code devised during the Tokyo Round, for example, not only specifiesconditions under which countervailing duties can be applied in response tosubsidies, but also sets limits on the severity of such duties.

In the design of institutions, enforcement should rest on provisions for infor-mation sharing and reciprocity rather than on nominal powers of coercion throughcentralized enforcement. Despite extensive voting rules, the IEA has never taken aformal vote, but its members share information about oil-company and governmentbehavior. The IAEA has helped deter misuse of nuclear fuels by threat of discoverythrough its inspection system rather than by assured sanctions in the event ofviolation. Other contemporary regimes—whether for surveillance of exchange ratesby the Group of Five, for maintaining bank lending to debtor countries, or for exportcredits—also depend on self-enforcement through the generation and dispersal ofinformation, rather than on the wielding of supranational powers.

Failure to notice this point can lead governments to downgrade what interna-tional regimes can do—provide a framework for decentralized enforcement of rules.If countries focus instead on the fact that regimes cannot enforce rules throughsupranational machinery, the international community may miss opportunities todevelop new institutions that, by generating information about reputations, mayallow practices of greater reciprocity to evolve in world politics.

Look for the Right MomentIn the life cycles of international regimes, erosion takes place gradually, as govern-ments and transnational actors find loopholes in the rules. Defenders of regimesspend their time putting their fingers in the dike.

Occasionally, crises threaten to burst the dike and destroy the established order.The inadequacy of existing regimes becomes evident; old conceptions of reality areshattered and entrenched interests and coalitions shaken or torn apart. Theprospect of a world financial crisis can concentrate a banker’s mind.

In periods of crisis, opportunities for the construction of international regimescharacteristically arise. “Creative destruction,” in the economist JosephSchumpeter’s phrase, can result from the collapse of the presuppositions underlyingold regimes or from a shattered complacency about the absence of regimes. Thusthe first serious discussions of international monetary coordination, which ledeventually to Bretton Woods, took place in the ominous depression years beforeWorld War II. Economic crises in the 1970s and 1980s saw not only the collapseor erosion of old regimes, but also the founding of the IEA in 1974, after the oilcrisis, and the strengthening of the IMF after 1982, in the wake of threats ofdefault by Third World countries.

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The period from 1929 to 1933, however, demonstrates that creative responses tocrises are not automatic. During crises, policymakers may not look for innovativesolutions but may try to muddle through from week to week. Caught unprepared,they may have no time to draw up well-conceived plans for institutional change. Yetif policymakers have thought through the fundamental issues in advance, they maybe able to use the opportunities created by crises to devise immediate solutions thatsupport long-term strategy.

In other words, if American foreign policy is to take advantage of crises ratherthan merely react to them, there is need to think about the desirable evolution ofinstitutions before lightning strikes. No grand design for a broad array of new rulesand institutions is necessary. Grand designs stir up objections from many interests,domestic as well as international. Nevertheless, thinking ahead can be used to turnparticular crises, even those limited to particular problems, into openings forconstructive change. It may not be possible to create comprehensive regimes withan enormous impact, but partial regimes may emerge with constructive effects inparticular areas.

For at least the last 25 years the U.S. government has not been known for effectivelong-range planning. American policymakers can do better than they have at this task.But much thinking about future regimes will be done outside government; at the sametime, the effectiveness of the outsiders’ work will depend on the receptivity of insiders.Likewise, executive-branch planning must involve key congressional figures. Suchlinks not only help secure legislative support for foreign-policy initiatives, but also helpbring new ideas into the policymaking process.

Use Regimes to Focus U.S. Attention on the FutureIn the eyes of its critics, American foreign policy is notoriously unreliable. Does itmake sense to talk about strategies for international regimes when America cannotseem to avoid confusing and confounding its allies by engaging in erratic, often ide-ological behavior?

But these shortcomings in American foreign policy reinforce the need to usecrises in a sophisticated way to carry out constructive change. During these crisesthe president’s leeway for getting decisive measures through Congress becomeswider, often dramatically so. The United States has always had difficulty keepingsight of its own long-term interests. The division between executive and legislatureand the splits within branches of government make it particularly hard for theUnited States to pursue far-sighted self-interest. Attempting to lay out the principlesof international regimes can clarify the country’s long-term, internationalistinterests. Like the Constitution, international regimes can remind the country of itsfundamental purposes, for they can legitimate a broad conception of the nationalinterest that takes into account others’ values and policies.

This effort at long-range planning also helps the United States retain its allianceleadership. Constraints imposed by constructive international regimes makeAmerica a more reliable partner internationally than if it followed unilateralist poli-cies. Credible promises can be made and extracted by partners with solid reputations.


In addition, regimes often provide leaders of allied countries with opportunities toinfluence the domestic debates of alliance states by holding each to the regime’sstandards. This strengthens alliances by giving participating governments the oppor-tunity to exercise “voice,” in the economist Albert Hirschman’s phrase, rather thansimply to “exit.” Since America’s allies have some influence over its policies, they aremore willing to commit themselves to alignments with the United States. Theimpressive strength and durability of America’s alliances can be attributed in part toits commitment to the constructive constraints of international regimes.

REGIME MAINTENANCE

In world politics today actors are many, and a bewildering array of issues overlap.Diffusion of power has reduced America’s ability to establish international regimesas it pleases. No matter how high the defense budget, the United States cannotrecapture the preponderant position it held in the 1950s. Further, maintaining mili-tary strength is only part of a viable foreign policy. As the pre-eminent political andcommercial power, America also has a strong national interest in building andmaintaining international regimes. Yet recent foreign-policy debates have given lit-tle attention to this dimension of national interest.

Major international regimes continue to reflect U.S. interests, by and largebecause of U.S. influence in establishing and perpetuating them. But unless theUnited States takes the lead in maintaining them, it is unlikely that other countrieswill have the interest or ability to do their share. As Great Britain found in the1930s, when the leading trading country closes its market, the protectionistscramble is on. When Washington extended U.S. jurisdiction over new areas of theseas, as it did in 1945, it should have expected others to go it one better—as severalcoastal states in Latin America did. If the United States relaxes its standards fornuclear exports, other suppliers will relax theirs, probably even more. Americanrestraint is no longer sufficient to build or maintain rules, but it almost certainlyremains necessary.

This U.S. interest in regime maintenance does not mean the United States needremain passive as others in pursuit of narrow national interests chip away at existingrules and arrangements. Indeed, there is much to be said for reciprocity as an effectiveway to maintain cooperation in world politics. And sometimes reciprocity will entailretaliation, as it does increasingly in international trade. But the ultimate objective ofretaliation should be to reinforce compliance by others with general rules, ratherthan to seek exemptions for oneself—exemptions that will be only temporary andthat will contribute to the decline of international order, which all should be strivingto avoid. Thus the United States should design its strategies to provide realisticincentives to others, behaving in their self-interests, to support international regimesthat the United States finds valuable.

In addition to maintaining existing regimes, Washington should be looking forchances to construct new regimes or to expand old ones when opportunities arise.Following are three areas where substantial progress may be possible in the future.

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United Nations PeacekeepingPeacekeeping is an old subject, to which few scholars or policymakers have paidmuch attention recently. Yet in the aftermath of the failure of American efforts inLebanon, the imperfect practice of interposing forces under the banner of the U.N.or regional organizations looks ripe for reinspection. Not only have Americans beenchastened by the Lebanese experience, but also there is evidence that the SovietUnion has begun to rethink its opposition to peacekeeping and to realize that bothsuperpowers might be better off if devices could be found to limit intervention inlocal or regional conflicts. Any efforts at effective peacekeeping, however, wouldhave to be limited and cautious. They must be based on the original U.N. Charter’sconception of peacekeeping as a Security Council responsibility to be carried outwith the consent of all great powers, rather than on the view, sponsored by theUnited States in the 1950s and early 1960s, that effective peacekeeping could beundertaken under authority granted by the General Assembly and could be directedeven toward a great power or its ally. Limited peacekeeping is worth reconsidering,not the overly ambitious efforts reflected in Korea and the Congo.

International DebtThe regime for international debt has shown itself to be remarkably flexible duringthe last 3 years: Massive default has been avoided, and several of the major debtors,such as Mexico and Brazil, have taken impressive and painful adjustment measures.Yet crisis management, however clever, cannot create new and lasting arrangementsthat will avoid both eventual collapse and a repetition of the historical debt cycle,which moves from moderate lending to excessive lending, crisis, and collapse (ornear-collapse).3 There is a good deal to be said for acting now, before memories ofthe crisis fade, to construct a sustainable set of arrangements that will ensure both asteady flow of resources to developing countries from private and public sources andregular payment of debts that have been incurred.

Exchange RatesDisillusionment with the current arrangements for floating exchange rates iswidespread. Hopes that equilibrium rates would emerge automatically, yieldingbalanced current accounts, have been dashed by massive capital flows that haveled to overvaluation of the dollar. The response has been not only discontent inEurope, led by France, but also increasing pressure for protectionism in theUnited States, which a recession would only accentuate. Little can be said nowfor calling a grand public conference such as Bretton Woods—which, it should berecalled, was preceded by many months of intense negotiations. Yet it might befeasible to devise a “deal” linking greater exchange-rate stability, a lower value ofthe dollar, and the institution of the new round of trade talks desired by theUnited States. It would be wiser to explore this possibility than to engage indiscriminatory action against France—and therefore against the European


Community in general—in retaliation for its refusal at the Bonn summit in 1985to set a date for new trade negotiations. The moment for concerted action on theexchange-rate regime may be arriving; thought should be devoted now to whatthe character of such a regime should be and to how concessions by the UnitedStates could be used strategically to attain U.S. objectives in other areas, suchas trade.

Dreams of a slow, even unsteady march toward the world order envisaged by thefounders of the U.N. are obsolete. But the United States cannot simply exchangethese dreams for the alluring promise of a world without the frustrations of multilat-eral cooperation. Economic and security interdependence is a reality that cannot bewished away. The United States is not strong enough to be able safely to assume thatother countries will acquiesce in its unilateral attempts to reshape the world. Globalunilateralism in the 1980s could therefore be as expensive an illusion as isolationismwas half a century ago.

What global unilateralism misses is the continuing American interest in interna-tional regimes. In addition to worrying about military power and Soviet intentions,the United States needs to be concerned about other dimensions of power andrelations with the whole international system. To deal effectively with issues involvinginternational regimes—such as how to deal with UNESCO, what to do about nuclearproliferation, and whether to rescue or abandon the nondiscriminatory provisions ofGATT—the United States needs a coherent strategy based on a realistic understand-ing of the conditions for effective multilateral cooperation. Such a strategy shouldemphasize reciprocity—which means being tough on rule violators as well as beingwilling to cooperate with those who wish to cooperate. The United States mustsupport international institutions that facilitate decentralized enforcement of rules,without naively believing that enforcement will be automatic or easy. The UnitedStates should reflect, in advance of crises, on how international institutions can helpachieve cooperation, and it must be ready, in crises, to put forward proposals that havebeen devised in quieter times.

Such a combination of institutional strategy and tactical flexibility could besimultaneously visionary and realistic. It would be opportunistic in the best sense:ready to seize opportunities provided by crises to make regimes more consistent withAmerica’s interests and values. It is a viable alternative to recurring fantasies ofglobal unilateralism.

CHAPTER 1 INTERDEPENDENCE IN WORLD POLITICS

1. Stanley Hoffmann, “Notes on the Elusiveness of Modern Power,” International Journal 30 (Spring1975): 184.

2. “A New National Partnership,” speech by Secretary of State Henry A. Kissinger at Los Angeles,January 24, 1975. News release, Department of State, Bureau of Public Affairs, Office of MediaServices, p. 1.

3. See, for example, Lester R. Brown, World Without Borders: The Interdependence of Nations(New York: Foreign Policy Association, Headline Series, 1972).

4. Charles Kindleberger, American Business Abroad (New Haven: Yale University Press, 1969), p. 207.5. The terms are derived from Stanley Hoffmann, “Choices,” Foreign Policy 12 (Fall 1973): 6.6. For instance, see Robert Angell, Peace on the March: Transnational Participation (New York: Van

Nostrand, 1969).7. John Maynard Keynes, The General Theory of Employment, Interest and Money (London:

Macmillan, 1957), p. 383.8. For the classic contemporary formulation of political realism, see the works of Hans J. Morgenthau,

particularly Politics Among Nations: The Struggle for Power and Peace (New York: Knopf, 1948 andsubsequent editions). See also Morgenthau, “Another ‘Great Debate’: The National Interest of theUnited States,” American Political Science Review 46 (December 1952): 961–88; and Morgenthau,Scientific Man Versus Power Politics (Chicago: University of Chicago Press, 1946). A different butequally impressive statement of a “realist” position can be found in E. H. Carr, The Twenty Years’Crisis, 1919–1939, 2nd ed. (London: Macmillan, 1946). Carr, however, emphasizes economicsources of power more strongly.

9. For some evidence on trends in interdependence, using a variety of measures, see RichardRosecrance and Arthur Stein, “Interdependence: Myth or Reality,” World Politics 26, no. 1(October 1973), and Peter J. Katzenstein, “International Interdependence: Some Long-TermTrends and Recent Changes,” International Organization 29, no. 4 (Fall 1975).

10. See Robert Engler, The Politics of Oil: Private Power and Democratic Directions (Chicago: Universityof Chicago Press, 1962).

11. Arnold Wolfers’ “National Security as an Ambiguous Symbol” remains the classic analysis. See hiscollection of essays, Discord and Collaboration (Baltimore: Johns Hopkins University Press, 1962).Daniel Yergin’s study of the emergence of the doctrine of national security (in place of thetraditional concept of defense), portrays it as a “commanding idea” of the Cold War era. SeeDaniel Yergin, The Shattered Peace: The Rise of the National Security State (Boston: HoughtonMifflin, 1976).

12. Secretary of State Henry A. Kissinger, Address before the Sixth Special Session of the UnitedNations General Assembly, April 15, 1974, News release, Department of State, Office of MediaServices, p. 2. Reprinted in International Organization 28, no. 3 (Summer 1974): 573–83.

13. Alex Inkeles, “The Emerging Social Structure of the World,” World Politics 27 (July 1975): 479.14. Hoffmann, “Notes on the Elusiveness of Modern Power,” p. 183.15. Hans J. Morgenthau, “The New Diplomacy of Movement,” Encounter 3, no. 2 (August 1974): 56.

This view—which strikes us as wrong—fits oddly with the tradition of realism!16. See Jeffrey Hart, “Dominance in International Politics,” International Organization 30 (Spring 1976).

Notes

295

296 Notes

17. Kenneth Waltz, “The Myth of Interdependence,” in Charles Kindleberger (ed.), The InternationalCorporation (Cambridge, Mass.: MIT Press, 1970).

18. See Anthony Lanyi, “Political Aspects of Exchange-Rate Systems,” in Richard Merritt (ed.),Communications in International Politics (Urbana: University of Illinois Press, 1972), for a discussionof a game-theoretical way to deal with such issues, using payoff matrices. For a later effort alongsimilar lines see Richard N. Cooper, “Prolegomena to the Choice of an International MonetarySystem,” International Organization 29, no. 1 (Winter 1975): 63–98.

19. See Barbara Haskell, “Recent Swedish-American Relations: Some Analytical Observations,”translated as “Det moraliserande Sverige,” Internationella studier 1 (Stockholm, 1976): 30–32.

20. Susan Strange, “What Is Economic Power and Who Has It?” International Journal 30 (Spring1975): 219.

21. For a review of international regimes in the economic areas, see C. Fred Bergsten and Lawrence B.Krause (eds.), World Politics and International Economics (Washington, D.C.: Brookings Institution,1975), originally published as a special issue of International Organization 29, no. 1 (Winter 1975).For a review of international regimes in fields involving science and technology, see the specialissue of International Organization, International Responses to Technology, edited by John GerardRuggie and Ernst B. Haas, 29, no. 3 (Summer 1975).

22. Kenneth N. Waltz, “Theory of International Relations,” in Nelson W. Polsby and Fred I.Greenstein (eds.), Handbook of Political Science, vol. 8, International Politics (Reading, Mass.:Addison-Wesley, 1975), pp. 1–86. See also George Modelski, World Power Concentrations:Typology, Data, Explanatory Framework (Morristown, N.J.: General Learning Co., 1974).

CHAPTER 2 REALISM AND COMPLEX INTERDEPENDENCE

1. Hans J. Morgenthau, Politics Among Nations: The Struggle for Power and Peace, 4th ed. (New York:Knopf, 1967), p. 36.

2. See the material referred to in footnotes 9 and 13, Chapter 1; also see Edward L. Morse,“Transnational Economic Processes,” in Robert O. Keohane and Joseph S. Nye, Jr. (eds.),Transnational Relations and World Politics (Cambridge, Mass.: Harvard University Press, 1972).

3. Henry A. Kissinger, “A New National Partnership,” Department of State Bulletin, February 17,1975, p. 199.

4. See the report of the Commission on the Organization of the Government for the Conduct ofForeign Policy (Murphy Commission) (Washington, D.C.: U.S. Government Printing Office,1975), and the studies prepared for that report. See also Raymond Hopkins, “The InternationalRole of ‘Domestic’ Bureaucracy,” International Organization 30, no. 3 (Summer 1976).

5. New York Times, May 22, 1975.6. For a valuable discussion, see Klaus Knorr, The Power of Nations: The Political Economy of

International Relations (New York: Basic Books, 1975).7. Business Week, January 13, 1975.8. Stanley Hoffmann, “The Acceptability of Military Force,” and Laurence Martin, “The Utility of

Military Force,” in Force in Modern Societies: Its Place in International Politics (Adelphi Paper,International Institute for Strategic Studies, 1973). See also Knorr, The Power of Nations.

9. Henry Brandon, The Retreat of American Power (New York: Doubleday, 1974), p. 218.10. International Implications of the New Economic Policy, U.S. Congress, House of Representatives,

Committee on Foreign Affairs, Subcommittee on Foreign Economic Policy, Hearings, September16, 1971.

11. For a more detailed discussion, see Robert O. Keohane and Joseph S. Nye, Jr., “TransgovernmentalRelations and International Organizations,” World Politics 27, no. 1 (October 1974): 39–62.

12. Raymond Bauer, Ithiel de Sola Pool, and Lewis Dexter, American Business and Foreign Policy(New York: Atherton, 1963), chap. 35, esp. pp. 472–75.

Notes 297

13. Branislav Gosovic and John Gerard Ruggie, “On the Creation of a New International EconomicOrder: Issue Linkage and the Seventh Special Session of the UN General Assembly,” InternationalOrganization 30, no. 2 (Spring 1976): 309–46.

14. Robert W. Cox, “The Executive Head,” International Organization 23, no. 2 (Spring 1969):205–30.

CHAPTER 3 EXPLAINING INTERNATIONAL REGIME CHANGE

1. K. W. Rothchild (ed.), Power in Economics (London: Penguin Modern Economics Readings, 1971),p. 7. Cited in Susan Strange, “What Is Economic Power, and Who Has It?” International Journal 30,no. 2 (Spring 1975): 214.

2. See Peter Bachrach and Morton Baratz, “Decisions and Nondecisions: An Analytical Framework,”American Political Science Review 57 (1963): 632–42. Reprinted in Roderick Bell, David Edwards,and Harrison Wagner (eds.), Political Power (New York: Free Press, 1969).

3. For data, see Peter J. Katzenstein, “International Interdependence: Some Long-Term Trends andRecent Changes,” International Organization 29, no. 4 (Autumn 1975): 1021–34.

4. John W. Burton, Systems, States, Diplomacy and Rules (Cambridge, Eng.: Cambridge UniversityPress, 1968), pp. 28–31.

5. Richard Cooper, “Trade Policy Is Foreign Policy,” Foreign Policy 9 (Winter 1972–73).6. Thucydides, The Peloponnesian War, Book V, chap. XVII (Melian Dialogues) (New York: Modern

Library, 1951), p. 331.7. Hans J. Morgenthau, Politics Among Nations: The Struggle for Power and Peace, 4th ed. (New York:

Knopf, 1967), p. 5.8. See Charles Kindleberger, The World in Depression 1929–39 (Berkeley: University of California

Press, 1974). Collective action theory also points to this conclusion. See, for a good statement,Mancur Olson, Jr., The Logic of Collective Action (Cambridge, Mass.: Harvard UniversityPress, 1965).

9. Kindleberger, The World in Depression.10. For the figures, see John P. McKay, Pioneers for Profit: Foreign Entrepreneurship and Russian

Industrialization, 1885–1913 (Chicago: University of Chicago Press, 1970), table 2, p. 5.11. David P. Calleo, “American Foreign Policy and American European Studies: An Imperial Bias?” in

Wolfram Hanreider (ed.), The United States and Western Europe (Cambridge, Mass.: Winthrop,1974), pp. 56–78.

12. See particularly Charles Kindleberger, “The International Monetary Politics of a Near-GreatPower: Two French Episodes, 1926–36 and 1960–70,” Economic Notes (Siena) 1, nos. 2–3 (1972).

13. These are titles of books by Raymond Aron, Amaury de Riencourt, and Henry Brandon.14. We are indebted to Rob Paarlberg for pointing this out to us.15. See Robert Gilpin, U.S. Power and the Multinationals (New York: Basic Books, 1975). See also

C. Fred Bergsten, “Coming Investment Wars?” and Joseph S. Nye, Jr., “Multinational Corporationsin World Politics,” in Foreign Affairs 53, no. 1 (October 1974).

16. See Kenneth N. Waltz, “Theory of International Relations,” in Fred I. Greenstein and Nelson W. Polsby (eds.), Handbook of Political Science, vol. 8, International Politics (Reading, Mass.:Addison-Wesley, 1975).

17. This has been the case for many years. See G. Griffith Johnson, The Treasury and Foreign Policy(Cambridge, Mass.: Harvard University Press, 1939), pp. 206–207.

18. See Gardner Patterson, Discrimination in International Trade: The Policy Issues (Princeton:Princeton University Press, 1966); and Kenneth W. Dam, The Law and Politics of the GATT(Chicago: University of Chicago Press, 1970).

19. See Donald J. Puchala, “Domestic Politics and Regional Harmonization in the EuropeanCommunities,” World Politics 27, no. 4 (July 1975): 496–520.

298 Notes

CHAPTER 4 THE POLITICS OF OCEANS AND MONEY:HISTORICAL OVERVIEW

1. Eyre Crowe, “Memorandum on the Present State of British Relations with France and Germany”(January 1907), reprinted in G. P. Gooch and Harold Termperly (eds.), British Documents on theOrigins of the War, 1898–1914 (London: His Majesty’s Stationery Office, 1928), p. 403.

2. Richard N. Cooper, “Prolegomena to the Choice of an International Monetary System”International Organization 29, no. 1 (Winter 1975): 66.

3. For a close and detailed analysis of foreign exchange market developments, which illustrates verywell the tight linkages among events in the international monetary system, see issues of WorldFinancial Markets, published by the Morgan Guaranty Trust Company of New York.

4. Committee on Currency and Foreign Exchanges After the War, First Interim Report (Cd. 9182)(London: HMSO, 1918), pp. 3–4, quoted in Leland B. Yeager, International Monetary Relations, 2nded. (New York: Harper & Row, 1976), p. 304.

5. Arthur I. Bloomfield, Monetary Policy Under the International Gold Standard (New York: FederalReserve Bank of New York, 1959), p. 60.

6. Committee on Finance and Industry, Report (The Macmillan Report) (London: HMSO, 1931),p. 125, quoted in Yeager, International Monetary Relations, p. 304.

7. See especially Peter H. Lindert, Key Currencies and Gold, 1900–1913, Princeton Studies inInternational Finance no. 24 (Princeton: Princeton University International Finance Section,1969). This sentence paraphrases his conclusion, summarized on p. 78. For earlier statements,see Alec G. Ford, The Gold Standard, 1880–1914: Britain and Argentina (Oxford: ClarendonPress, 1962); and Arthur I. Bloomfield, Short-term Capital Movements Under the Pre-1914 GoldStandard (Princeton: Princeton University Press, 1963). For a recent work emphasizing theimportance of British rule in India for the prewar international financial system, see Marcello deCecco, Money and Empire: The International Gold Standard 1890–1914 (Totowa, N.J.: Rowan andLittlefield, 1975).

8. Lindert, Key Currencies, p. 78.9. Ibid., table 1, pp. 10–11.

10. Ford, The Gold Standard, p. 25.11. Lindert, Key Currencies, pp. 14–15, 21–27.12. Calculated from Lindert, Key Currencies, table 2, pp. 18–19.13. Arthur I. Bloomfield, Monetary Policy. See especially his “concluding remarks,” pp. 60–62.

Lindert quotes Chancellor of the Exchequer Callahan’s comment in 1965: “There were nobalance-of-payments problems fifty years ago because there were no balance-of-paymentsstatistics.” Lindert, Key Currencies, p. 36.

14. Ford points out that large landowners, who were the dominant political group in Argentina,manipulated the system to impart a bias toward devaluation of the peso, benefiting them (sincethey were paid in gold-fixed prices). The Gold Standard, p. 91.

15. See Yeager, International Monetary Relations, pp. 296–97. Also see Bloomfield, Monetary Policy; andLindert, Key Currencies.

16. Bloomfield, Short-term Captial Movements, p. 91.17. William A. Brown, The International Gold Standard Reinterpreted, 2 vols. (New York: National

Bureau of Economic Resources, 1950). On page 781, he stresses this feature of the post-1919 system.18. Yeager, International Monetary Relations, p. 311.19. Ibid., p. 319.20. Ibid., pp. 324–29. See also Stephen V. O. Clarke, The Reconstruction of the International Monetary

System: The Attempts of 1922 and 1933, Princeton Studies in International Finance no. 23(Princeton: Princeton University International Finance Section, 1973).

21. “In the fall of 1923, the rate was stabilized at 1 trillion marks = 23.8 cents.” Clarke,Reconstruction, p. 5.

Notes 299

22. Yeager takes a different view, blaming governmental ineptitude for the fall in the franc andinterpreting the British experience as evidence for stabilizing speculation in the pound. SeeInternational Monetary Relations, pp. 321, 328.

23. Ibid., pp. 328–29.24. Clarke, Reconstruction, pp. 13–14.25. See Lindert, Key Currencies.26. Clarke, Reconstruction, p. 14.27. Ibid., pp. 17–18.28. W. A. Brown categorized the period from 1919 to 1925 as one of restoration, and 1925–31 as one

of experimentation. Yeager speaks of the “postwar system” after 1925. Clarke refers to “theachievement of European monetary stability that followed sterling’s return to gold in the springof 1925.” See Brown, International Gold Standard, p. 180; Yeager, International Monetary Relations,p. 330; Clarke, Reconstruction, p. 18.

29. D. E. Moggridge, The Return to Gold, 1925 (Cambridge, Eng.: Cambridge University Press,1969), p. 88.

30. Ibid., p. 80.31. Ibid., p. 87.32. As we shall see in the next chapter, the coherence of United States policy at this time was not

high. The United States Treasury was reluctant to be too active in European monetary affairs, andmuch of the burden, and the influence, fell to the head of the Federal Reserve Bank of New York,Benjamin Strong, and his successor, George Harrison. For a discussion of international pressures onthe British, see Charles Kindleberger, The World in Depression, 1929–1939 (Berkeley: University ofCalifornia Press, 1973), p. 47.

33. Clarke, Reconstruction, p. 24.34. Kindleberger, World in Depression, pp. 202–207; Herbert Feis, 1933: Characters in Crisis (Boston:

Little, Brown, 1966), p. 126.35. Kindleberger, World in Depression, quoting Roosevelt’s statement, p. 219.36. Kindleberger, World in Depression, pp. 247–57; Yeager, International Monetary Relations, pp. 335–36.37. Kindleberger, World in Depression, p. 259.38. See Yeager’s discussion, International Monetary Relations, pp. 335–56. He argues convincingly

against Nurkse, that the failure of the 1930s does not provide strong enough evidence of thealleged impractability of floating rates.

39. Ibid., p. 377.40. Alfred E. Eckes, Jr., A Search for Solvency: Bretton Woods and the International Monetary System,

1941–1971 (Austin: University of Texas Press, 1975), p. 228.41. The figures for countries at Genoa are found in Dean E. Traynor, International Monetary and Financial

Conferences in the Interwar Period (Washington, D.C.: Catholic University of America Press, 1949),p. 73. Feis, 1933, gives the figure for London (p. 245). For the Bretton Woods meeting and prelimi-nary discussion, see J. Keith Horsefield, The International Monetary Fund, 1945–1965 (Washington,D.C.: IMF, 1969), pp. 3–120.

42. Eckes, Search for Solvency, p. 110.43. Ibid., pp. 60–63.44. For an extensive and detailed discussion of voting arrangements in the IMF, see Joseph Gold,

Voting and Decisions in the International Monetary Fund, 1945–1965 (Washington, D.C.: IMF, 1972).45. Horsefield, IMF 1945–1965, p. 108.46. Eckes, Search for Solvency, p. 212.47. For an excellent account, see Richard N. Gardner, Sterling-Dollar Diplomacy: The Origins and the

Prospects of Our International Economic Order (Oxford: Clarendon Press, 1956; revised ed., New York:McGraw-Hill, 1969). For another point of view, see Joyce Kolko and Gabriel Kolko, The Limits ofPower: The World and the United States Foreign Policy, 1945–1954 (New York: Harper and Row, 1972),esp. chap. 3 (pp. 59–90).

300 Notes

48. For the definitive account, see Horsefield, IMF 1945–1965, chap. 18 (pp. 474–94).49. Fred Hirsch, Money International (London: Penguin Press, 1967), p. 241.50. Ibid., p. 202.51. Ibid., p. 262.52. See Robert W. Russell, “Transgovernmental Interaction in the International Monetary System,

1960–1972,” International Organization 27, no. 4 (Autumn 1973): 431–64.53. Eckes, Search for Solvency, p. 255.54. Lawrence Krause, “Private International Finance,” in Robert O. Keohane and Joseph S. Nye, Jr.

(eds.), Transnational Relations and World Politics (Cambridge, Mass.: Harvard University Press,1972), p. 184.

55. Richard N. Cooper, “Economic Interdependence and Foreign Policy in the Seventies,” WorldPolitics 24, no. 2 (January 1972): 166–67.

56. Eckes, Search for Solvency, p. 257.57. Marina V. N. Whitman, “The Current and Future Role of the Dollar: How Much Symmetry?”

Brookings Papers on Economic Activity 3 (1974): 539.58. Susan Strange indicates that in April 1971, foreign official holdings of dollars were $18.5 billion,

compared to the official value of the United States gold stock of about $10 billion. See “The DollarCrisis,” International Affairs 48, no. 2 (April 1972).

59. For a chronology of major events, see IMF Survey, March 1, 1976.60. Jonathan Aronson’s Ph.D. dissertation at Stanford University explores the roles of banks in the inter-

national monetary system. For a review of some changes in bank and government positions during the1970s, see Jonathan Aronson, “Multiple Actors in the Transformation of the International MonetarySystem” paper presented to the International Studies Association Annual Meetings, February 1976.

61. The Economist (London), August 5, 1972, p. 6162. Marina V. N. Whitman, “The Payments Adjustment Process and the Exchange Rate Regime:

What Have We Learned?” American Economic Review, May 1975, p. 144.63. Ibid., p. 138.64. See the New York Times, June 14, 1974; The Economist, June 8, 1974 and November 22, 1975; and

the IMF Survey, January 19, 1976, for accounts of these events.65. New York Times, January 9, 1976.66. New York Times, January 10, 1976.67. IMF Survey, January 19, 1976.68. See the New York Times, January 9, 1976; and The Economist, January 10, 1976.69. For a recent critical comment indicating doubt about the continued usefulness of the IMF, see The

Economist, January 17, 1976, p. 81. Another author has recently pointed out that the IMF’s resourcesin 1977 are likely to amount to only about 4 percent of world trade, in contrast to 15 percent in 1948.Thus “a member’s access to the Fund’s resources, which is limited by its quota, nowadays oftenamounts only to an insignificant part of the deficit with which the member is faced.” See Tom deVries, “Jamaica, or the Non-Reform of the International Monetary System,” Foreign Affairs 54, no. 3(April 1976): 599.

70. “Scramble for the Sea,” The Economist, March 3, 1976.71. See Evan Luard, “Who Gets What on the Seabed?” Foreign Policy 9 (Winter 1972–73).72. Edward Wenk, Jr., The Politics of the Oceans (Seattle: University of Washington Press, 1972), p. 250.73. Edward N. Luttwak, The Political Uses of Sea Power (Baltimore: Johns Hopkins University Press,

1974), p. 8.74. Representative Bob Wilson, Congressional Record, February 9, 1972.75. Quoted in Lawrence Juda, Ocean Space Rights (New York: Praeger, 1975), p. 99.76. National Academy of Sciences, International Marine Science Affairs (Washington, D.C.: National

Academy of Sciences, 1972), p. 82.77. Louis Henkin, “Changing Law for the Changing Seas,” in Edmund Gullion (ed.), The Uses of the

Seas (Englewood Cliffs, N.J.: Prentice-Hall, 1968), p. 75.

Notes 301

78. Max Sorensen, “Law of the Sea,” International Conciliation 520 (November 1958): 198, 201.79. Sayre Swarztrauber, The Three Mile Limit of Territorial Seas (Annapolis, Md.: Naval Institute Press,

1972), p. 108.80. Pitman B. Potter, The Freedom of the Seas in History, Law and Politics (New York: Longmans, Green,

1924), p. 249.81. Swarztrauber, Three Mile Limit, p. 111.82. See Edward M. House, The Freedom of the Seas (London: National Council for the Prevention of

War, n.d.); and Labour Party, Freedom of the Seas: Old and New (London, n.d.).83. Swarztrauber, Three Mile Limit, p. 71.84. Roland G. Usher, quoted in Benjamin Russell, Anglo-American Relations (Boston: World Peace

Foundation, 1919), p. 43.85. Calculated from figures in World Peace Foundation, “The Staggering Burden of Armaments,”

A League of Nations 4 (April 1921): 242.86. The British government was internally divided on whether to accede to the American demands.

The Times (London), July 7, 1923.87. See William E. Butler, The Law of Soviet Territorial Waters (New York: Praeger, 1967). This exception

was a continuation of a Tsarist policy.88. Swarztrauber, Three Mile Limit, p. 148.89. C. John Colombos, The International Law of the Sea (New York: McKay, 1967), p. 103.90. See Bobbie Smetherman and Robert Smetherman, Territorial Seas and Inter-American Relations

(New York: Praeger, 1974).91. World Peace Foundation, “Staggering Burden of Armaments,” p. 244.92. Sorensen, “Law of the Sea,” p. 201.93. E. D. Brown, “The 1973 Conference on the Law of the Sea: The Consequences of Failure to

Agree,” in Lewis Alexander (ed.), The Law of the Sea: A New Geneva Conference (Kingston, R.I.:Law of the Sea Institute, 1972).

94. Quoted in Elizabeth Young and Brian Johnson, The Law of the Sea (London: Fabian Society,1973), p.3.

95. Edward L. Miles, “The Dynamics of Global Ocean Politics,” in Douglas Johnston (ed.), MarinePolicy and the Coastal Community (London: Croom Helm, forthcoming).

96. J. E. S. Fawcett, “The Law of the Sea: Issues at Caracas,” The World Today 30 (June 1974), p. 239.97. José Ayala quoted in the New York Times, January 30, 1976.

CHAPTER 5 COMPLEX INTERDEPENDENCE IN OCEANSAND MONEY

1. Edward Luttwak, The Political Uses of Seapower (Baltimore: Johns Hopkins University Press,1974), p. 38.

2. See Michael McGwire, K. Booth, and J. McDonnell (eds.), Soviet Naval Policy: Objectives andConstraints (New York: Praeger, 1975).

3. James Cable, Gunboat Diplomacy: Political Applications of Limited Naval Force (New York:Praeger, 1971).

4. Foreign Relations of the United States, 1935, vol. 1 (Washington, D.C.: U.S. Government PrintingOffice, 1953), p. 918; Foreign Relations of the United States, 1936, vol. 5 (Washington, D.C.: U.S.Government Printing Office, 1954).

5. Robert Osgood, “U.S. Security Interests in Ocean Law,” Ocean Development and International Law2 (Spring 1974): 29.

6. Cable, Gunboat Diplomacy, p. 226.7. Jeffrey Hart, “The Anglo-Icelandic Cod War of 1972–73,” unpublished manuscript, 1976.

302 Notes

8. McGwire, Booth, McDonnell, Soviet Naval Policy, p. 528.9. Ibid., p. 529.

10. Cable, Gunboat Diplomacy, pp. 175ff.11. Jacob Viner, “International Finance and Balance of Power Diplomacy,” in Jacob Viner,

International Economics (Glencoe, Ill.: Free Press, 1951), p. 85.12. For the definitive study, see Albert O. Hirschman, National Power and the Structure of Foreign Trade

(Berkeley: University of California Press, reissued, 1969).13. See Richard N. Gardner, Sterling-Dollar Diplomacy: The Origins and Prospects of Our International

Economic Order (Oxford: Clarendon Press, 1956; revised ed., New York: McGraw-Hill, 1969).14. Hugh Thomas, Suez (New York: Harper and Row, 1966), p. 145.15. Susan Strange, Sterling and British Policy: A Political Study of an International Currency in Decline

(Oxford: Oxford University Press, 1971), p. 97.16. Stephen Cohen, International Monetary Reform, 1964–69: The Political Dimension (New York:

Praeger, 1970).17. Andrew Boyle, Montagu Norman (London: Cassell, 1967), p. 229. See also Stephen V. O. Clarke,

Central Bank Cooperation, 1924–31 (New York: Federal Reserve Bank of New York, 1967), p. 119.18. Herbert Feis, 1933: Characters in Crisis (Boston: Little, Brown, 1966), p. 213. Of course, as we saw

in chapter 4, the monetary uncertainties of the time were not cleared up by the conference.19. See Ann Hollick, “Seabeds Make Strange Politics,” Foreign Policy 9 (Winter 1972/73); and H.

Gary Knight, “Special Domestic Interests and United States Oceans Policy,” in Robert G. Wirsing(ed.), International Relations and the Future of Oceans Space (Columbia: University of SouthCarolina Press, 1974).

20. This process is well described by Ann Hollick, “United States Ocean Policy: 1948–1971,” Ph.D.dissertation, Johns Hopkins University, 1971.

21. Annual Report of the Secretary of the Treasury on the State of Finances, 1972 (Washington, D.C.: U.S.Government Printing Office, 1972).

22. Feis, 1933, p. 294.23. J. David Singer and Michael Wallace, “Intergovernmental Organization in the Global System,

1815–1965: A Quantitative Description,” International Organization 24 (Spring 1970): 239–87.24. For a discussion see Fred Hirsch, Money International (London: Penguin Press, 1967), sec. 4, pp. 219–82.25. The term has been used by Robert W. Russell, and has also appeared in journalistic discussions of

international monetary affairs.26. Based on interviews.27. See Edward L. Miles, “Transnationalism in Space: Inner and Outer,” in Robert Keohane and

Joseph S. Nye, Jr. (eds.), Transnational Relations and World Politics (Cambridge, Mass.: HarvardUniversity Press, 1972); and Warren Wooster, “Interaction Between Intergovernmental andScientific Organizations in Marine Affairs,” International Organization 27 (Winter 1973): 252–75.

28. J. B. Condliffe, The Commerce of Nations (New York: Norton, 1950), p. 447.29. Clarke, Central Bank Cooperation, p. 47.30. Alice C. Barrass, “Afloat on a Sea of Controls,” The Banker 123 (June 1973): 613–20.31. See Robert W. Russell, “The Organization of the International Monetary System: Contributions of

Transnational Elite Networks to Rules and Reforms,” paper prepared for delivery at the 1973 annualmeeting of the American Political Science Association, New Orleans, Louisiana, September 1973.

32. Assistant Secretary of the Navy Robert Frosch quoted in Lawrence Juda, Ocean Space Rights(New York: Praeger, 1975), p. 99.

33. “Export Drive,” New York Times, June 7, 1971. “Typical is Secretary Connally’s recent suggestionthat the United States should pull the Sixth Fleet out of the Mediterranean to retaliate againstCommon Market preferential trading arrangements there.”

34. Based on interviews.35. Osgood, “U.S. Security Interests,” p. 14.36. Based on interviews.37. The Times (London), July 7, 1923; Morning Post (London), November 3, 1923.

Notes 303

38. Ann L. Hollick, “National Ocean Institutions,” Ocean Development and International Law 3, no. 2(1975): 163.

39. See Clarke, Central Bank Cooperation; Boyle, Montagu Norman; and Lester V. Chandler, BenjaminStrong, Central Banker (Washington, D.C.: Brookings Institution, 1958).

40. Clarke, Central Bank Cooperation, p. 88.41. Boyle, Montagu Norman, p. 247.42. Ibid., p. 304. One may not want to give complete credence to Schact’s retrospective account, but

the story is too good to omit, even if one takes it with a grain of salt.43. G. Griffith Johnson, Jr., The Treasury and Monetary Policy, 1933–1938 (Cambridge, Mass.: Harvard

University Press, 1939).44. See for instance, Sir Roy Harrod, The Life of John Maynard Keynes (New York: Harcourt Brace,

1951); and J. Keith Horsefield, The International Monetary Fund (Washington, D.C.: IMF, 1969).45. Robert W. Russell, “Transgovernmental Interaction in the International Monetary System,

1960–1972,” International Organization 27, no. 4 (Autumn 1973): 431–64. See also Hirsch, MoneyInternational, particularly chap. 11, “Central Bankers International.” The personal friendshipbetween Giscard d’Estaing and Helmut Schmidt, developed while they were finance ministers ofFrance and the Federal Republic of Germany, respectively, is well known.

46. Russell, “Transgovernmental Interaction,” p. 463.47. To Provide for a Modification of the Par Value of the Dollar, U.S. Congress, House Committee on

Banking and Currency, Hearings, 92nd Cong., 2nd sess., on H.R. 13120, March 1, 2, 3, and 6,1972, pp. 11, 19–20.

48. Anthony Barber at the IMF, Annual Meeting of the Board of Governors (Washington, D.C.: IMF,1971), p. 7, quoted in John Odell, “The United States in the International Monetary System,”Ph.D. dissertation, University of Wisconsin, 1976.

49. Richard N. Cooper, “Prolegomena to the Choice of an International Monetary System,”International Organization 29, no. 1 (Winter 1975): 89.

50. For elaboration of the conditions in more systematic fashion, see Robert O. Keohane and Joseph S.Nye, Jr., “Transgovernmental Relations and International Organizations,” World Politics 27, no. 1(October 1974): 39–62.

51. Bobbie Smetherman and Robert Smetherman, Territorial Seas and Inter-American Relations(New York: Praeger, 1974), p. 49.

52. New York Times, January 16, 1976.53. For an early but explicit comparison of the two areas, see Johnson, The Treasury and Monetary

Policy, pp. 206–07. See also E. E. Schattschneider, Politics, Pressure, and the Tariff (New York:Prentice-Hall, 1935); and Raymond A. Bauer, Ithiel de Sola Pool, and Lewis Anthony Dexter,American Business and Public Policy: The Politics of Foreign Trade (Chicago: Aldine-Atherton,1963). When one analyzes patterns of attention to trade issues over time in such sources as theNew York Times, one find that periods of high attention coincide with attempts, stimulated eitherby domestic interest groups or the executive branch, to adopt new trade legislation; the pattern ofattention is therefore very uneven, depending on whether the issue is before the Congress. Inmonetary affairs, by contrast, attention tends to build up as international crises develop.

54. “Formulation of United States Policy on the Resources of the Continental Shelf and on CoastalFisheries,” Foreign Relations of the United States, vol. 2 (Washington, D.C.: U.S. GovernmentPrinting Office, 1945), pp. 1481–1520.

55. Edward Wenk, Jr., The Politics of the Oceans (Seattle: University of Washington Press, 1972), p. 284.56. See for example, the annual reports of 1940 (pp. 119–28); 1955 (49–52); and 1972 (pp. 58–59).57. Gardner, Sterling-Dollar Diplomacy (1956), p. 204.58. Richard N. Cooper, “Trade Policy Is Foreign Policy,” Foreign Policy 9 (Winter 1972/73): 18–36.59. Henry A. Kissinger, speech, April 23, 1973.60. Based on interviews.61. Sayre A. Swarztrauber, The Three Mile Limit of Territorial Seas (Annapolis, Md.: Naval Institute

Press, 1972), p. 132.

304 Notes

62. J. Galtung, “A Structural Theory of Imperialism,” Journal of Peace Research no. 2 (1971): 81–118.63. See John Gerard Ruggie and Branislavs Gosovic, “On the Creation of a New International

Economic Order: Issue Linkage and the Seventh Special Session of the UN General Assembly,”International Organization 30, no. 2 (Spring 1976): 309–46.

64. See Joseph Gold, Voting and Decisions in the International Monetary Fund (Washington, D.C.:IMF, 1972).

CHAPTER 6 THE POLITICS OF RULE-MAKING IN OCEANSAND MONEY

1. For an excellent discussion, see Charles P. Kindleberger, The World in Depression, 1929–1939(Berkeley: University of California Press, 1973).

2. Robert Friedheim and Mary John, “The Soviet Position at the Third U.N. Law of the SeaConference,” in Michael MacGwire, K. Booth, and J. McDonnell (eds.), Soviet Naval Policy:Objectives and Constraints (New York: Praeger, 1975), p. 343.

3. William E. Butler, The Law of Soviet Territorial Waters (New York: Praeger, 1967).4. New York Times, October 7, 1954; Christian Science Monitor, November 30, 1954.5. New York Times, March 15, 1956; Christian Science Monitor, April 2, 1956.6. New York Times, July 29, 1956. David C. Loring, “The Fisheries Dispute,” in Daniel Sharp (ed.),

U.S. Foreign Policy and Peru (Austin: University of Texas Press, 1972), p. 73, argues that it wasprivate negotiations between the American Tunaboat Association and Peru that kept the peaceuntil the early 1960s when seining technology made bait unnecessary for tuna fishermen, andthey stopped purchasing coastal licenses.

7. T. Orchard Lisle, “Offshore Rights: Freedom of the Seas,” The Oil Forum, August 1955, p. 288.8. Richard N. Gardner, Sterling-Dollar Diplomacy: The Origins and the Prospects of Our International

Economic Order (Oxford: Clarendon Press, 1956), pp. 299–305; 319–325. Joyce Kolko and GabrielKolko attempt to argue, in our view with only limited success, that the fundamental motivation forAmerican policy was economic. What they do show is that farsighted American capitalists wouldhave had good reasons to espouse such a policy, and that some of them thought in these terms. SeeThe Limits of Power: The World and the United States Foreign Policy, 1945–1954 (New York: Harperand Row, 1972), esp. chap. 3.

9. Leland B. Yeager, International Monetary Relations, 2nd ed. (New York: Harper and Row, 1976), p. 413.10. U.S. Department of the Treasury Annual Report, 1950 (Washington, D.C.: U.S. Government

Printing Office, 1950), pp. 49–50; and Annual Report, 1955 (Washington, D.C.: U.S. GovernmentPrinting Office, 1955), pp. 49–50.

11. Henry Aubrey, “Behind the Veil of International Money,” Princeton Essays in International Financeno. 71 (January 1969): 9.

12. For two sets of estimates in the same range, see Ray S. Cline, World Power Assessment(Washington: Georgetown University, 1975), p. 145; and Kenneth N. Waltz, “America’s EuropeanPolicy Viewed in Global Perspective,” in Wolfram Hanreider (ed.), The United States and WesternEurope (Cambridge, Mass.: Winthrop Publishers, 1974), p. 13.

13. IMF Survey, January 19, 1976.14. U.S. Congress, Senate, Committee on Finance, Implications of Multinational Firms for World Trade and

Investment and for U.S. Trade and Labor, Report to the Committee on Finance by the U.S. TariffCommission, 93rd Cong., 1st sess. (Washington, D.C.: U.S. Government Printing Office, 1973), p. 539.

15. Richard N. Cooper, “The ‘System’ in Disarray,” Saturday Review/World, January 26, 1974; reprintedin Cooper’s testimony to the Joint Economic Committee in U.S., Congress, Joint EconomicCommittee, Hearings on The 1974 Economic Report of the President, 93rd Cong., 2nd sess., part 2,February 22, 1974, p. 621.

16. Sayre Swarztrauber, The Three Mile Limit of Territorial Seas (Annapolis, Md.: Naval Institute Press,1972), p. 108.

Notes 305

17. Pitman B. Potter, The Freedom of the Seas in History, Law and Politics (New York: Longmans, Green,1924), pp. 184, 193.

18. Swarztrauber, The Three Mile Limit of Territorial Seas, p. 171; also, Wilhelm Hadeler, “The Shipsof the Soviet Navy,” in M. G. Saunders (ed.), The Soviet Navy (New York: Praeger, 1958),pp. 140–42.

19. Norman Polmar, Soviet Naval Power (New York: National Strategy Information Center, 1972), p. 92.20. Admiral Zumwalt quoted in the New York Times, July 3, 1974; Senator Stennis in the New York

Times, September 20, 1974. Stennis argued further that the Soviet navy had two severe limitations—lack of aircraft carriers and of an amphibious force—and had no significant capability for operationoutside the Mediterranean. The Soviet Union has more submarines than the United States.

21. Swarztrauber, The Three Mile Limit of Territorial Seas, p. 172. The only areas in which the United Stateswas not superior was in total number of submarines and patrol craft.

22. Edward L. Miles in Douglas Johnston (ed.), Marine Policy and Coastal Community (London: CroomHelm, forthcoming).

23. Joseph S. Nye, Jr., “UNCTAD: Populist Pressure Group,” in Robert Cox and Harold Jacobson(eds.), The Anatomy of Influence (New Haven: Yale University Press, 1973), p. 361. The measure ofassociation is Kendall’s tau beta correlation coefficient which varies from –1.0 to +1.0.

24. Edward L. Miles, “The Structure and Effects of the Decision Process in the Seabed Committee andthe Law of the Sea Conference,” unpublished manuscript.

25. Based on interviews.26. Potter, The Freedom of the Seas, p. 230.27. Fred Hirsch, Money International (London: Penguin Press, 1967), pp. 262–63. See also Robert W.

Russell, “Transgovernmental Interaction in the International Monetary System, 1960–1972,”International Organization 27, no. 4 (Autumn 1973): table 1, p. 436.

28. The Economist (London), November 15 and 22, 1975.29. IMF Survey, January 5 and 19, 1976.30. Quotas are calculated from the proposed quotas listed in the IMF Survey, January 19, 1976.31. Richard N. Cooper, “Prolegomena to the Choice of an International Monetary System,”

International Organization 29, no. 1 (Winter 1975): 69.32. Interim Committee Communique, in IMF Survey, January 19, 1976, p. 19.33. Kindleberger, World in Depression, pp. 302–303.34. “Formulation of United States Policy on the Resources of the Continental Shelf and on Coastal

Fisheries,” Foreign Relations of the United States, vol. 2 (Washington, D.C.: U.S. GovernmentPrinting Office, 1945), pp. 1481–1530.

35. For a discussion along these lines, see Fred Hirsch, “The Politics of World Money,” The Economist,August 5, 1972, p. 62.

36. Ann Hollick, “United States Ocean Policy: 1948–1971,” Ph.D. dissertation, Johns HopkinsUniversity, 1971.

37. Charles Kindleberger quoting Keynes, Conference at Harvard’s Center for International Affairs,December 1975.

CHAPTER 7 UNITED STATES RELATIONS WITH CANADAAND AUSTRALIA

1. See Harry Eckstein, “Case Study and Theory in Political Science,” in Fred I. Greenstein and NelsonW. Polsby (eds.), The Handbook of Political Science, vol. 7 (Reading, Mass.: Addison-Wesley, 1975),pp. 78–138.

2. See Henry S. Albinski, Canadian and Australian Politics in Comparative Perspective (New York:Oxford University Press, 1973), for a good general discussion.

3. Brian Beedham, “Second to None: A Survey of Australia,” The Economist (London), March 27,1976, p. 42.

306 Notes

4. For an introduction to the relationship, see Gerald M. Craig, The United States and Canada(Cambridge, Mass.: Harvard University Press, 1968); the special issue of International Organization28 (Autumn 1974); and Donald M. Page, A Bibliography of Works on Canadian Foreign Relations,1945–1970 (Toronto: Canadian Institute of International Affairs, 1973).

5. Canada’s Defense Scheme #1 against the U.S. was formally cancelled in 1931, but the politicalsense of security community predated the demise of the military contingency plan. James Eayrs, InDefence of Canada, vol. 1 (Toronto: University of Toronto Press, 1964), p. 77.

6. See R. D. Cuff and J. L. Granatstein, Canadian-American Relations in Wartime (Toronto:Hakkert, 1975).

7. M. C. Urquhart (ed.), Historical Statistics of Canada (Toronto: Macmillan, 1965); StatisticsCanada, Canada Year Book (Ottawa: Information Canada, various years); Statistics Canada,Canada’s International Investment Position, 1926–67 (Ottawa: Information Canada, 1971); UnitedNations Statistical Yearbook (New York: United Nations, 1961, 1971).

8. “Canada and the United States: Principles for Partnership” (Merchant-Heeney Report),Department of State Bulletin 53 (July–September 1965), pp. 193–208.

9. The total is 18,000, but among the 11,500 visits involving National Defence are a number of visitsfor military training. Department of External Affairs, “Canadian Governmental Instruments forConducting Relations with the United States,” Appendix B (Ottawa, 1969).

10. C. Robert Dickerman, “Transgovernmental Challenge and Response in Scandinavia and NorthAmerica,” International Organization 30, no. 2 (Spring 1976): 213–40.

11. Dickerman, “Transgovernmental Challenge,” pp. 232–33.12. “Canada and the United States.” Even critics acknowledged the existence of the regime. See

Steven Clarkson (ed.), An Independent Foreign Policy for Canada? (Toronto: McClelland andStewart, 1968).

13. Interview, Ottawa, 1973.14. Dickerman, “Transgovernmental Challenge.”15. Raymond A. Esthus, From Enmity to Alliance: U.S.-Australian Relations, 1931–1941 (Seattle:

University of Washington Press, 1964), p. 13.16. Foreign Relations of the United States, 1944, vol. 3 (Washington, D.C.: U.S. Government Printing

Office, 1944), pp. 168–201, esp. 191–94.17. For a discussion of the Australian figures, see Donald T. Brash, American Investment in Australian

Industry (Cambridge, Mass.: Harvard University Press, 1966), pp. 28–33.18. International Monetary Fund/International Bank for Reconstruction and Development, Direction

of Trade, 1970–74 (Washington, D. C.: IMF/IBRD, n.d.). In 1974, 9.3 percent of Australia’sexports and 63.7 percent of Canada’s went to the United States; 20.8 percent of Australia’s importsand 65.1 percent of Canada’s came from the United States.

19. Major memoir and secondary sources used in this study were as follows:

Memoirs:Eisenhower, Dwight D. The White House Years: Mandate for Change 1953–1956. Garden City, N.Y.:Doubleday, 1963.–––. The White House Years: Waging Peace 1956–1961. Garden City, N.Y., Doubleday, 1965.Menzies, Robert. Afternoon Light. New York: Coward-McCann, 1967.–––. The Measure of the Years. London: Cassell, 1970.Miller, T. B., ed. Australian Foreign Minister: The Diaries of R. G. Casey 1951–60. London:Collins, 1972.Spender, Percy. Exercises in Diplomacy: The ANZUS Treaty and the Colombo Plan. New York:New York University Press, 1969.

Biographies:Crisp, L. F. Ben Chifley. London: Longmans, Green, 1960.Dalziel, Allan. Evatt the Enigma. Melbourne: Lansdowne Press, 1967.

Notes 307

Perkins, Kevin. Menzies: Last of the Queen’s Men. Adelaide: Rigby, 1968.Tennant, Kylie. Evatt: Politics and Justice. Sydney: Angus and Robertson, 1970.

General Works on Australian Foreign Policy or U.S.-Australian Relations:Esthus, Raymond A. From Enmity to Alliance: U.S.-Australian Relations, 1931–1941. Seattle:University of Washington Press, 1964.Grattan, C. Hartley. The United States and the Southwest Pacific. Cambridge, Mass.: HarvardUniversity Press, 1961.Greenwood, Gordon, and Harper, Norman, eds. Australia in World Affairs, vols. 1–3.Vancouver: University of British Columbia, 1957, 1963, 1968.Harper Norman, ed. Pacific Orbit: Australian-American Relations Since 1942. Melbourne: F. W.Cheshire, for the Australian-American Association, 1968.Miller, T. B. Australia’s Foreign Policy. Sydney: Angus and Robertson, 1968.Moore, John H., ed. The American Alliance: Australia, New Zealand and the United States1940–1970. North Melbourne: Cassell Australia, 1970.Reese, Trevor. Australia, New Zealand and the United States: A Survey of International Relations1941–1968. London: Oxford University Press, 1969.Watt, Alan. The Evolution of Australian Foreign Policy. Cambridge, Eng.: CambridgeUniversity Press, 1967.

Works Primarily on U.S. and Australian Economic Policy:Australian Department of the Treasury. Overseas Investment in Australia. Canberra:Australian Government Publishing Service, 1972.Brash, Donald. American Investment in Australian Industry. Cambridge, Mass.: HarvardUniversity Press, 1966.Crawford, J. G. Australian Trade Policy 1942–1966; A Documentary History. Canberra:Australian National University Press, 1968.Evans, John. The Kennedy Round in American Trade Policy: The Twilight of the GATT?Cambridge, Mass.: Harvard University Press, 1971.McColl, G. D. The Australian Balance of Payments: A Study of Post-War Developments.Carlton, Victoria: Melbourne University Press, 1965.Malmgren, Harold, ed. Pacific Basin Development: The American Interests. Lexington, Mass.:D. C. Heath, 1972.Moffatt, G. G. Import Control and Industrialization. Carlton, Victoria: Melbourne UniversityPress, 1970.Patterson, Gardner. Discrimination in International Trade: The Policy Issues 1945–1965.Princeton: Princeton University Press, 1966.Perkins, J. O. N. Australia in the World Economy, 2nd ed. Melbourne: Sun Books, 1971.Preeg, Ernest. Traders and Diplomats. Washington: The Brookings Institution, 1970.

Major official sources used in this study were as follows:Current Notes on International Affairs (1945–70). Published monthly by the AustralianDepartment for External Affairs.Department of State Bulletin (1945–70). Published weekly by the U.S. Department of State.Public Presidential Papers (1945–70). Published annually by the U.S. Government Printing Office.Foreign Relations of the United States (1920–47). Published annually by the U.S. GovernmentPrinting Office.References to Australia in the New York Times were systematically checked for the years1950–70. Also consulted were The Australian magazine (March 1965 to February 1966) andThe Australian Journal of Politics and History (1955–69). Various Australian periodicals andnewspapers were consulted as well.

308 Notes

20. For informed and accessible surveys of Australian politics and culture since the beginning of the1970s, see “surveys” in The Economist, June 23, 1973, and March 27, 1976.

21. Robin Boyd, “Mass Communications,” in Harper (ed.), Pacific Orbit, p. 145. We are grateful toAndrew Farran for pointing out to us the exaggerated nature of this statement.

22. The public sources contain many attempts to argue that ANZUS and the Japanese Peace Treatywere not connected as part of an American-Australian bargain. In April of 1951, however, it wasmade clear by Australian Minister of External Affairs Spender that it would be unrealistic toconsider the tentative American draft treaty with Japan except in the framework of effectivesecurity guarantees in the Pacific. (Current Notes on International Affairs 22 [1951]: 233.)

23. David Baldwin, “The Myths of the Special Relationship,” in Stephen Clarkson (ed.), AnIndependent Foreign Policy for Canada? (Toronto: McClelland and Stewart, 1968), p. 5.

24. Arnold Wolfers, Discord and Collaboration (Baltimore: Johns Hopkins University Press, 1962), p. 97.25. See, for example, Theo Sommer, “The Community Is Working,” Foreign Affairs 51 (July 1973): 753.26. We are grateful to Peyton Lyon and Garth Stevenson of Carleton University and John Trent of the

University of Ottawa for helping to indicate the cases marked as most important for Canadianautonomy in tables 7.7–7.9.

27. David Leyton-Brown, “Governments of Developed Countries as Hosts to MultinationalEnterprise,” Ph.D. dissertation, Department of Government, Harvard University, 1973.

28. See General Foulkes, “The Complications of Continental Defense,” in Livingston Merchant (ed.),Neighbors Taken for Granted (New York: Praeger, 1966), p. 101, where he states: “In the assessmentof the threat Canada is dependent upon the United States for virtually all principal intelligenceestimates.”

29. F. Conrad Raabe, “Canada’s Decision to Recognize the Communist Government of China,”Association for Canadian Studies in the U.S. Newsletter 2 (Spring 1972): 12–20. Also, Mike: TheMemoirs of the Right Honourable Lester B. Pearson, vol. 2 (Toronto: University of Toronto Press,1973), p. 195.

30. Peter Bachrach and Morton Baratz, “Two Faces of Power,” American Political Science Review 56(December 1962): 947–52.

31. See G. P. de T. Glazebrook, A History of Canadian External Relations, vol. 2 (Toronto: McClellandand Stewart, 1966), chaps. 17 and 18; and John B. Brebner, North Atlantic Triangle (Toronto:McClelland and Stewart, 1968), chap. 15.

32. Walter Stewart, Trudeau in Power (New York: Outerbridge and Dienstfrey, 1971), p. 153; also BruceThordarson, Trudeau and Foreign Policy (Toronto: Oxford University Press, 1972), p. 186.

33. James Eayrs, Canada in World Affairs, 1955–57 (Toronto: Oxford University Press, 1959),pp. 153–60; James R. Wagner, “Partnership: American Foreign Policy Toward Canada,1953–1957,” Ph.D. dissertation, University of Denver, 1966, chap. 7.

34. Eayrs, Canada in World Affairs, p. 128.35. See Australia in Facts and Figures, various issues.36. An official discussion of this approach can be found in Submission by the Department of Foreign

Affairs to the Royal Commission on Australian Government Administration (Canberra: October 1974).37. See Trevor R. Reese, Australia, New Zealand, and the United States, A Survey of International

Relations, 1941–1968 (London: Oxford University Press, 1969), p. 231. Menzies’ letter wasdiscussed in the New York Times, August 1964. The issue is discussed frequently in Australia in Factsand Figures, especially nos. 81 and 83 (1964), but also subsequently.

38. Lloyd says that the international oil companies provided “mild support,” Canada in World Affairs,p. 86. Lobbying by northern U.S. refiners was more important. (From interviews in Washington, D.C.)

39. Richard B. Bilder, “The Canadian Arctic Waters Pollution Prevention Act: New Stresses on theLaw of the Sea,” Michigan Law Review 69 (November 1970): 4.

40. See the cases marked in tables 7.7–7.9 as discussed in footnote on page 169.41. George Ball, The Discipline of Power (Boston: Little, Brown, 1968), p. 113.

Notes 309

42. See Joseph S. Nye, Jr., Peace in Parts: Integration and Conflict in Regional Organizations (Boston:Little, Brown, 1971), chaps. 2 and 3.

43. See John Sigler and Dennis Goresky, “Public Opinion on United States–Canadian Relations,”International Organization 28, no. 4 (Autumn 1974): 637–38.

44. See Isaiah A. Litvak, Christopher Maule, and R. Robinson, Dual Loyalty: Canadian–U.S. BusinessArrangements (Toronto: McGraw-Hill, 1971), chap. 1.

45. Nancy Hooker (ed.), The Moffat Papers (Cambridge, Mass.: Harvard University Press, 1956),chap. 4.

46. Based on interviews. See also K. J. Holsti and T. A. Levy, “Bilateral Institutions,” in InternationalOrganization 28, no. 4 (Autumn 1974).

47. See Ann Hollick, “Canadian-American Relations: Law of the Sea,” International Organization 28,no. 4 (Autumn 1974).

48. Wagner, “Partnership.”49. Based on interviews in Washington and Ottawa, 1973, 1975.50. Quoted in Dickerman, “Transgovernmental Challenge.”51. Based on interviews, Washington and Ottawa, 1975.52. Further comparable studies are being undertaken at Harvard’s Center for International Affairs.

CHAPTER 8 COPING WITH INTERDEPENDENCE

1. For an interesting and suggestive exploration of these issues for the United States and France inthree issue areas, see Peter J. Katzenstein, “International Relations and Domestic Structure:Foreign Economic Policies of Advanced Industrial States,” International Organization 30, no. 1(Winter 1976): 1–46.

2. See Edward V. Gulick, Europe’s’ Classical Balance of Power (New York: Norton, 1967).3. These thoughts were stimulated by Alfred E. Kahn’s paper, “The Implications of an

Electrification Strategy for Canada and the United States,” delivered at Carleton University,Ottawa, October 1975.

4. Johan Galtung, “Nonterritorial Actors and the Problem of Peace,” in Saul Mendlovitz (ed.), Onthe Creation of a Just World Order (New York: Free Press, 1975).

5. See David Mitrany, A Working Peace System (Chicago: Quadrangle, 1966); and Robert Angell,Peace on the March: Transnational Participation, (New York: Van Nostrand, 1969).

6. Charles Kindleberger. The World in Depression, 1929–39 (Berkeley: University of California Press,1974), p. 307.

7. As Susan Strange points out in “What Is Economic Power and Who Has It?” International Journal30 (Spring 1975): 220.

8. Kindleberger, World in Depression, p. 305.9. For an elaboration of the concept of collective economic security, see Lawrence Krause and Joseph

S. Nye, Jr., “Reflections on the Economics and Politics of International Economic Organizations,”International Organization 29, no. 1 (Winter 1975): 323–42.

10. For a discussion of these issues, see Appendix B, “The Management of Global Issues,” to the reportof the Commission on the Organization of the Government for the Conduct of Foreign Policy(Washington, D.C.: U.S. Government Printing Office, 1975).

11. The neofunctional strategy for European integration supports this argument. For a further discus-sion, see Robert O. Keohane and Joseph S. Nye, Jr., “International Interdependence andIntegration,” in Fred I. Greenstein and Nelson W. Polsby (eds.), Handbook of Political Science, vol.8 (Reading, Mass.: Addison-Wesley, 1975), pp. 363–414.

12. Quoted in The Economist (London), August 30, 1975, p. 46.

310 Notes

13. For a further discussion in greater detail, see Robert O. Keohane and Joseph S. Nye, Jr.,“Transgovernmental Relations and International Organizations,” World Politics 27, no. 1 (October1974): 39–62.

14. J. David Singer and Michael Wallace, “Intergovernmental Organization in the Global System,1815–1964,” International Organization 24 (Spring 1970): 239–87; and Robert Angell, Peace onthe March.

CHAPTER 9 POWER, INTERDEPENDENCE, AND THEINFORMATION AGE

1. Norman Angell, The Great Illusion: A Study of the Relation of Military Power in Nations to TheirEconomic and Social Advantage (New York: Putnam, 1910).

2. See, for example, Peter Drucker, “The Next Information Revolution,” Forbes (August 24, 1998):46–58; Alvin and Heidi Toffler, The Politics of the Third Wave (Kansas City, Mo.: Andrews andMcMeel, 1995); Esther Dyson, Release 2.0: A Design for Living in the Digital Age (New York:Broadway Books, 1997); Morley Winograd and Dudley Buffa, Taking Control: Politics in theInformation Age (New York: Henry Holt, 1996); Don Tapscott, The Digital Economy: Promise andPeril in the Age of Networked Intelligence (New York: McGraw-Hill, 1996).

3. Clive Crook, “The Future of the State,” The Economist (Sept. 20, 1997): S5–S7.4. Jeremy Greenwood, The Third Industrial Revolution: Technology, Productivity, and Income Inequality

(Washington, D.C.: AEI Press, 1997), pp. 20–23.5. Intel co-founder Gordon Moore formulated his now-famous “Moore’s Law” of microprocessing

power and cost in 1965. As Intel’s Website essay on Moore’s Law notes, “The average price of atransistor has fallen by six orders of magnitude due to microprocessor development. This isunprecedented in world history; no other manufactured item has decreased in cost so far, so fast.”(http://developer.intel.com/solutions/archive/issue2/focus.htm#OVER).

6. Douglass North, Structure and Change in Economic History (New York: W. W. Norton), pp. 163–64.7. For an examination of various facets of this early stage, see Elaine C. Kamarck and Joseph S. Nye,

Jr. (eds.), Democracy.com? Governance in a Networked World (Hollis, N.H.: Hollis, 1999).8. Herbert Simon, quoted in Hal R. Varian, “The Information Economy,” Scientific American (Sept.

1995): 200.9. Joseph S. Nye, Jr., Bound to Lead: The Changing Nature of American Power (New York: Basic Books,

1990): 31–32.10. Samuel P. Huntington, The Clash of Civilizations and the Remaking of World Order (New York:

Simon and Schuster, 1996).11. Akihiko Tanaka, “Issues for Japan’s East Asian Diplomacy,” Japan Review of International Affairs

(Spring 1999): 11.12. Joseph S. Nye, Jr., and William A. Owens, “America’s Information Edge,” Foreign Affairs

(March/April 1996): 20–36.13. Paul Dibb, “The Revolution in Military Affairs and Asian Security,” Survival (Winter

1997/1998): 93–116.14. George A. Akerlof, “The Market for Lemons,” Quarterly Journal of Economics (August 1970): 488–500.15. Arjun Appuradai, Modernity at Large (Minneapolis: University of Minnesota Press, 1996).16. Margaret E. Keck and Kathryn Sikkink, Activists Beyond Borders : Advocacy Networks in

International Politics (Ithaca, N.Y.: Cornell University Press, 1998).17. Peter M. Haas, “Epistemic Communities and International Policy Coordination,” International

Organization (Winter 1992): 1–36.18. See Sheila Jasanoff, “Is Science Socially Constructed—And Can It Still Inform Public Policy?”

Science and Engineering Ethics 2: 263–276.19. Joseph S. Nye, Jr., “Can Singapore Fix Its Schools?” Newsweek International Edition (Aug. 23, 1999): 2.

http://developer.intel.com/solutions/archive/issue2/focus.htm#OVER

Notes 311

CHAPTER 10 POWER, INTERDEPENDENCE, ANDGLOBALISM

1. New York Times (Oct. 4, 1999): A1.2. See for example “Warning—Bioinvasion” (full-page advertisement), New York Times (Sept. 20,

1999): A11.3. Keohane and Nye, Power and Interdependence, p. 8.4. United Nations Development Program [UNDP], Human Development Report (New York: Oxford

University Press, 1999).5. Dani Rodrik, “Sense and Nonsense in the Globalization Debate,” Foreign Policy (Summer

1997): 19–37.6. Keith Griffin, “Globalization and the Shape of Things to Come,” in Macalester International:

Globalization and Economic Space 7 (Spring 1999): 3; “One World?” The Economist (Oct. 18,1997): 79–80.

7. Samuel P. Huntington, The Clash of Civilizations and the Remaking of World Order (New York:Simon and Schuster, 1996).

8. New York Times (June 15, 1999): D4.9. Jared Diamond, Guns, Germs and Steel: The Fates of Human Societies (New York: W.W. Norton,

1998): 202, 210; William H. McNeill, Plagues and Peoples (London: Scientific Book Club, 1979):168; see also Alfred W. Crosby, Ecological Imperialism: The Biological Expansion of Europe, 900-1900(Cambridge: Cambridge University Press, 1986).

10. Alfred Crosby, The Columbian Exchange: Biological and Cultural Consequences of 1492 (Westport,Conn.: Greenwood Press, 1972).

11. John P. McKay, et al., A History of Western Society, 4th ed. (Boston: Houghton Mifflin, 1991): 106–107.12. Arjun Appuradai, Modernity at Large (Minneapolis: University of Minnesota Press, 1996).13. Paul Krugman, The Return of Depression Economics (New York: Norton, 1999): 16.14. John W. Meyer, et al., “World Society and the Nation-State,” American Journal of Sociology 103,

(1997): 144–81.15. New York Times (Sept. 21, 1999): A12; Financial Times London (Sept. 21, 1999): 1.16. Diamond, p. 202.17. David Held, et al., Global Transformations: Politics, Economics and Culture (Stanford: Stanford

University Press, 1999): 21–22.18. New York Times (Aug. 29, 1999): section 4, p. l.19. Neal M. Rosendorf, “The Global Power of American Pop Culture,” paper presented at John F. Kennedy

School of Government Visions Project Conference on Globalization, Bretton Woods, N.H., July 1999.20. Rosendorf, p. 10, fn. 28.21. Richard Storry, A History of Modern Japan (Harmondsworth, U.K.: Penguin, 1960): 115-116;

Hioaki Sato, “The Meiji Government’s Remarkable Mission to Learn from Europe and Japan,”Japan Times, (Oct. 14, 1999).

22. Frederick Schauer, “The Politics and Incentives of Legal Transplantation,” paper presented at JohnF. Kennedy School of Government Visions Project Conference on Globalization, Bretton Woods,N.H., July 1999.

23. Joseph S. Nye, Jr., Bound to Lead: The Changing Nature of American Power (New York: Basic Books,1990): 31–32.

24. Keohane and Nye, Power and Interdependence, p. 9.25. Keohane and Nye, Power and Interdependence, p. 13.26. For a discussion of “vulnerability” as the concept is used in the analysis of sustainable development,

see Jesse C. Ribot, “The Causal Structure of Vulnerability: Its Application to Climate ImpactAnalysis,” GeoJournal 35, no. 2 (1995): 119–122.

27. Alvin C. Gluek, Jr., “Canada’s Splendid Bargain: The North Pacific Fur Seal Convention of 1911,”Canadian Historical Review 63, no. 2 (1982): 179–201.

312 Notes

28. Thomas Friedman, The Lexus and the Olive Tree: Understanding Globalization (New York: FarrarStraus Giroux, 1999): 7–8.

29. “A Semi-Integrated World,” The Economist (Sept. 11, 1999): 42.30. Joseph Stiglitz, “Weightless Concerns,” Financial Times, London (Feb. 3, 1999): op-ed page.31. Robert Jervis, System Effects: Complexity in Political and Social Life (Princeton: Princeton University

Press, 1997).32. “One World?” The Economist (Oct. 18 1997): 80.33. World Economic Outlook 1999 (Washington: International Monetary Fund): 67.34. Greenspan quoted in Friedman, p. 368.35. Held, et al., p. 235.36. “China Ponders New Rules of ‘Unrestricted War,’” Washington Post (Aug. 8, 1999): l.37. M. Mitchell Waldrop, Complexity: The Emerging Science at the Edge of Order and Chaos (New York:

Touchstone Books, 1992).38. Adam Smith, The Wealth of Nations, reprint, George Stigler, ed. (Chicago: University of Chicago

Press, 1976), chapter 3 heading.39. Karl W. Deutsch, et al., Political Community in the North Atlantic Area: International Organization in

the Light of Historical Experience (Princeton: Princeton University Press, 1957).40. Friedman, pp. 41–58.41. John Maynard Keynes. The Economic Consequences of the Peace (first published, 1920; reprinted,

Penguin Books, 1988): p. 11.42. Frances Cairncross, The Death of Distance: How the Communications Revolution Will Change Our

Lives (Boston: Harvard Business School Press, 1997).43. Nye, Bound to Lead, pp. 121–122.44. Francis Fukuyama, The End of History and the Last Man (New York: Free Press, 1992).45. Bill Emmott, Japanophobia: The Myth of the Invincible Japanese (New York: Times Books, 1993).46. Max Weber, The Protestant Ethic and the Spirit of Capitalism, 2nd Roxbury ed. translated by Talcott

Parsons; revised introduction by Randall Collins (Los Angeles: Roxbury, 1998).47. Peter Gourevitch, Politics in Hard Times: Comparative Responses to International Economic Crises

(Ithaca: Cornell University Press, 1986); Ronald Rogowski, Commerce and Coalitions: How TradeAffects Domestic Political Alignments (Princeton: Princeton University Press, 1989).

48. Margaret Keck and Kathryn Sikkink, Activists Beyond Borders: Advocacy Networks in InternationalPolitics (Ithaca: Cornell University Press, 1998).

49. New York Times (October 13, 1999): A3.50. Helen V. Milner and Robert O. Keohane, “Internationalization and Domestic Politics:

A Conclusion,” in Keohane and Milner, eds., Internationalization and Domestic Politics (Cambridge:Cambridge University Press, 1996): 242–255.

51. Glen Firebaugh, “Empirics of World Income Inequality,” The American Journal of Sociology, v. 104(May 1999) p. 1597ff.

52. Bruce M. Russett, et al., World Handbook of Political and Social Indicators (New Haven, Conn.: YaleUniversity Press, 1964 [repr. Greenwood Press, 1977]): 156.

53. United Nations Development Program (UNPD), Human Development Report 1999 (New York:Oxford Press, 1999): table 11, pp. 180–183.

54. World Bank, Knowledge for Development: World Development Report 1998-99 (New York: OxfordUniversity Press, 1999), table 5, pp. 198–199.

55. UNDP, p. 3.56. Robert Lawrence, Single World, Divided Nations (Washington, D.C.: Brookings Institution Press,

1996); George J. Borjas, Heaven’s Door: Immigration Policy and the American Economy (Princeton:Princeton University Press, 1999): chap. 1.

57. For an optimistic assessment of the economic impact of immigration to the United States, see forexample Susan B. Carter and Richard Sutch, “Historical Background to Current ImmigrationIssues,” in James P. Smith and Barry Edmonston, eds., The Immigration Debate: Studies on theEconomic, Demographic, and Fiscal Effects of Immigration (Washington, D.C.: National Academy

Notes 313

Press, 1998); on the lopsided benefits to wealthy native-born Americans see for example George J.Borjas, “The New Economics of Immigration: Affluent Americans Gain, Poor Americans Lose,”Atlantic Monthly (May 1996): 72–80.

58. UNDP, p. 156.59. Jeffrey G. Williamson, “Globalization and the Labor Market: Using History to Inform Policy,” in

Philippe Aghion and Jeffrey G. Williamson, Growth, Inequality and Globalization: Theory, Historyand Policy (Cambridge: Cambridge University Press, 1998), pp. 105–200.

60. Karl Polanyi, The Great Transformation (New York: Rinehart, 1944).61. Peter J. Katzenstein, Small States in World Markets: Industrial Policy in Europe (Ithaca, N.Y.: Cornell

University Press, 1985); Geoffrey Garrett, “Global Markets and National Politics: Collision Course orVirtuous Circle?” International Organization 52, no. 4 (Fall 1998): 147–184; Dani Rodrik, HasGlobalization Gone Too Far? (Washington, D.C.: Institute for International Economics, 1997), chap. 5.

62. Daniel Brass and Marlene Burckhardt, “Centrality and Power in Organizations,” in Nitin Nohriaand Robert Eccles, eds., Networks and Organizations (Boston: Harvard Business School Press,1992), pp. 191–215; John Padgett and Christopher Ansell, “Robust Actors and the Rise of theMedici, 1400–1434,” American Journal of Sociology 98, n. 6, (May 1993): 1259–1319. We areindebted to David Lazer and Jane Fountain for help on this point.

63. Ronald Burt, Structural Holes: The Social Structure of Competition (Cambridge, Mass.: HarvardUniversity Press, 1992): chap. 1.

64. Michael J. Sandel, Democracy’s Discontents (Cambridge, Mass.: Harvard University Press, 1996): 338ff.65. See especially the UNDP, cited above, chap. 5.66. Dani Rodrik, “The Global Fix,” New Republic (Nov. 2, 1998): 17.67. For opposing arguments, see for example Susan Strange, The Retreat of the State: The Diffusion of

Power in the World Economy (New York: Cambridge University Press, 1996), and Linda Weiss, TheMyth of the Powerless State (Ithaca: Cornell University Press, 1998).

68. Edward D. Mansfield and Helen V. Milner, eds., The Political Economy of Regionalism (New York:Columbia University Press, 1997).

69. Robert O. Keohane, After Hegemony: Cooperation and Discord in the World Political Economy(Princeton: Princeton University Press, 1984): 54–55.

70. Cary Coglianese, “Transforming Global Governance: From Nation-States to InternationalInstitutions”; Elizabeth Hurley, “A Whole World in One Glance: Privacy as a Key Enabler ofIndividual Participation in Democratic Governance”; Viktor Mayer-Schoenberger, “Globality andContent Regulations,” Papers presented at John F. Kennedy School of Government Visions ProjectConference on Globalization, Bretton Woods, N.H., July 1999.

71. Robert O. Keohane and Joseph S. Nye, Jr., “Transgovernmental Relations and InternationalOrganizations,” World Politics (October 1974); Anne-Marie Slaughter, “The Real New WorldOrder,” Foreign Affairs (Sept.-Oct. 1997).

72. Saskia Sassen, “Embedding the Global in the National: Implications for the Role of the State,” inMacalester International 7 (Spring 1999); “Globalization and Economic Space,” p. 39; see alsoSassen, Losing Control? Sovereignty in an Age of Globalization (New York: Columbia UniversityPress, 1996).

73. Dennis Thompson, “Democratic Theory and Global Society,” Journal of Political Philosophy 7,n. 2, 1999.

AFTERWORD

1. Robert O. Keohane and Joseph S. Nye, Jr. (eds.), Transnational Relations and World Politics(Cambridge: Harvard University Press, 1972).

2. Albert O. Hirschman, National Power and the Structure of Foreign Trade (Berkeley: University ofCalifornia Press, 1945).

3. In Charles Kindleberger (ed.), The International Corporation (Cambridge, Mass.: MIT Press, 1970).

314 Notes

4. Kenneth N. Waltz, Theory of International Politics (Reading, Mass.: Addison-Wesley, 1979); see alsoRobert O. Keohane, ed., Neorealism and Its Critics (New York: Columbia University Press, 1986).

5. Karl Deutsch, et al., Political Community and the North Atlantic Area (Princeton: PrincetonUniversity Press, 1957); Ernst Haas, The Uniting of Europe (Stanford: Stanford University Press,1958); Joseph S. Nye, Jr., Peace in Parts (Boston: Little, Brown, 1971).

6. K. J. Holsti, “A New International Politics?” International Organization 32 (Spring 1978), p. 525;Stanley J. Michalak, “Theoretical Perspectives for Understanding International Interdependence,”World Politics 32 (October 1979), p. 148. For a mea culpa and a systemic attempt to articulate realistand neorealist assumptions, see Robert O. Keohane, “Theory of World Politics: Structural Realismand Beyond,” in Ada Finifter (ed.), Political Science: The State of the Discipline (Washington:American Political Science Association, 1983), reprinted in Robert O. Keohane, Neorealism andIts Critics (New York: Columbia University Press, 1986), pp. 158–203. Keohane’s later volume,After Hegemony: Cooperation and Discord in the World Political Economy (Princeton: PrincetonUniversity Press, 1984), explicitly seeks to build a theory of institutions with what could beconsidered liberal implications, on premises that are consistent with those of political realism.

7. For our account of the connections between integration theory and theories of interdependence,see our article “International Interdependence and Integration,” in Fred I. Greenstein andNelson W. Polsby (eds.), Handbook of Political Science, vol. 8 (Reading, Mass.: Addison-Wesley,1975), pp. 363–414. Karl Deutsch’s work on regional integration was as important to the field asHaas’; although we discuss both in our 1975 article, our own analysis owes a greater debt to Haas’neofunctionalism.

8. In contrast to this position, Holsti asserts that interdependence does not have a problem focus: “Thefact of interdependence,” he says, “has to lead to a problem before it warrants serious attention, justas concern with war, peace, order and power led to our field centuries ago.” K. J. Holsti, The DividingDiscipline: Hegemony and Diversity in International Theory (Winchester, Mass.: Allen and Unwin,1985), p. 47.

9. David A. Baldwin, “Interdependence and Power: A Conceptual Analysis,” InternationalOrganization 34 (Fall 1980), pp. 471–596.

10. Robert J. Art, “To What Ends Military Power?” International Security 4 (Spring 1980), pp. 16–17.Professor Art should be commended, however, for forthrightly acknowledging in print that he hadmisinterpreted our views. International Security 4 (Fall 1980), p. 189.

11. J. Martin Rochester, “The Rise and Fall of International Organization as a Field of Study,”International Organization 40 (Autumn 1986), note 52, p. 792. A similar mistake occurs in RayMaghroori and Bennett Ramberg (eds.), Globalism Versus Realism: International Relations’ ThirdDebate (Boulder: Westview Press, 1982).

12. John Gerard Ruggie, “International Responses to Technology: Concepts and Trends,” InternationalOrganization 29 (Summer 1975), p. 569; see also Richard N. Cooper, “Prolegomena to the Choiceof an International Monetary System,” International Organization 29 (Winter 1975), p. 64. See thistext, p. 20, Footnote 21.

13. Susan Strange, “Cave! Hic Dragones: A Critique of Regime Analysis,” International Organization36 (Spring 1982), reprinted in Stephen D. Krasner (ed.), International Regimes (Ithaca: CornellUniversity Press, 1983), where this claim is made on p. 344. For early uses of the regime terminol-ogy, see Fernand de Visscher, Le Regime Nouveau des Détroits (Brussels, 1924), in Extrait de la Revuede Droit Internationale et de Legislation Comparée (1924), nos. 1–2; L. Oppenheim, International Law,5th ed. (New York, 1937; edited by H. Lauterpacht), vol. 1, pp. 207, 366, on regimes forLuxembourg and the Elbe River; David M. Leive, International Regulatory Regimes (Lexington: D.C. Heath, Lexington Books, 1976), 2 vols.; and a variety of articles in the American Journal ofInternational Law, including 1) William L. Butler, “The Legal Regime of Russian TerritorialWaters,” 62(1968), pp. 51–77, 2) Richard Young, “The Legal Regime of the Deep-Sea Floor,” 62(1968), pp. 641–53, 3) Leo J. Harris, “Diplomatic Privileges and Immunities: A New Regime IsSoon to Be Adopted by the United States,” 62 (1968), pp. 98–113, 4) W. Michael Riesman,

Notes 315

“The Regime of Straits and National Security,” 74 (1980), pp. 48–76, 5) John Norton Moore, “TheRegime of Straits and the Third United Nations Conference on the Law of the Sea,” 74 (1980),pp. 77–121.

14. David A. Baldwin, “Power Analysis and World Politics: New Trends Versus Old Tendencies,”World Politics 31 (January 1979), pp. 169, 181.

15. Harrison Wagner, “Economic Interdependence, Bargaining Power and Political Influence,”unpublished paper, October 1986.

16. Our analysis (p. 121) of the 1971 change in the international monetary system illustrates thispoint. We emphasized not American weakness, but the underlying strength of the U.S. position,quoting Henry Aubrey to the effect that “a creditor’s influence over the United States rests onAmerican willingness to play the game according to the old concepts and rules.” See Chapter 6,footnote 11.

17. Arthur A. Stein, “The Politics of Linkage,” World Politics 33 (October 1980), p. 81.18. Thomas Schelling, The Strategy of Conflict (New York: Oxford University Press, 1960), p. 177.

Oye’s discussion of linkage appears in the introduction to Kenneth A. Oye, Donald Rothchild, andRobert J. Lieber, Eagle Entangled: U.S. Foreign Policy in a Complex World (New York: Longman,1979), especially pp. 13–17; see also Ernst B. Haas, “Why Collaborate? Issue-Linkage andInternational Regimes,” World Politics 32 (April 1980), pp. 357–402.

19. Robert Tollison and Thomas Willett, “An Economic Theory of Mutually Advantageous IssueLinkage in International Negotiations,” International Organization 33 (Fall 1979), pp. 425–49;James Sebenius, Negotiating the Law of the Sea (Cambridge: Harvard University Press, 1984),especially chap. 6; Sebenius, “Negotiation Arithmetic,” International Organization 37 (Spring1983), pp. 281–316.

20. For a brief discussion that draws on empirical work in this special issue of World Politics, see RobertAxelrod and Robert O. Keohane, “Achieving Cooperation under Anarchy: Strategies andInstitutions,” World Politics 39 (October 1986), especially pp. 239–43.

21. Considering the fondness for philosophical jargon in contemporary writing on internationalrelations theory, we should refer to this as the “ontological status” of complex interdependence.Somehow we cannot quite bring ourselves to do this.

22. John A. Vasquez and Richard W. Mansbach, “The Issue Cycle and Global Change,” InternationalOrganization 37 (Spring 1983), pp. 257–79, quotation on p. 274. See also Mansbach and Vasquez,In Search of Theory: A New Paradise for Global Politics (New York: Columbia University Press,1981), especially chap. 4.

23. See especially Keohane and Nye, “Transgovernmental Relations and International Organizations,”World Politics 27 (October 1974), pp. 39–62.

24. As a strategy for research, this approach was probably wise, since it is terribly difficult to linkdomestic politics and the international system together theoretically without reducing the analysisto little more than a descriptive hodgepodge. Recent efforts to bridge this gap, using the concept ofstate structure, have made notable progress. See Peter J. Katzenstein (ed.), Between Power andPlenty: Foreign Economic Policies of Advanced Industrialized States (Madison: University ofWisconsin Press, 1978); and Peter J. Katzenstein, Small States in World Markets (Ithaca: CornellUniversity Press, 1985).

25. Peter A. Gourevitch, “The Second Image Reversed,” International Organization 32 (Autumn 1978),pp. 881–912; and Politics in Hard Times (Ithaca: Cornell University Press, 1986).

26. Ruggie, “International Responses to Technology.”27. Robert Jervis identified a Concert of Europe regime in the nineteenth century; in his discussion of

contemporary international politics, however, he looked for a regime in the central strategicrelationship between the United States and the Soviet Union and failed to find one. Robert Jervis,“Security Regimes,” in Stephen D. Krasner (ed.), International Regimes (Ithaca: Cornell UniversityPress, 1983), pp. 173–94. Janice Gross Stein and Joseph S. Nye, Jr., have focused on narrowerrealms of activity and have discovered meaningful security regimes in contemporary world politics.

316 Notes

See Stein, “Detection and Defection: Security ‘Regime’ and the Management of InternationalConflict,” International Journal 40, (Autumn 1985), pp. 599–627; and Nye, “Nuclear Learning andU.S.–Soviet Security Regimes,” International Organization 41, no. 3 (Summer 1987). See alsoRoger K. Smith, “The Non-Proliferation Regime and International Relations,” InternationalOrganization 41 (Spring 1987), pp. 253–82. Smith makes a number of perceptive criticisms ofregime theory.

28. Krasner (ed.), International Regimes, p. 2.29. See Stephan Haggard and Beth Simmons, “Theories of International Regimes,” International

Organization 41 (Summer 1987), pp. 491–517.30. See Keohane, After Hegemony, which discusses money, trade, and oil; the articles in the Krasner

volume, International Regimes, on trade and the balance of payments, by Charles Lipson, Jock A.Finlayson and Mark Zacher, and Benjamin J. Cohen; and Vinod K. Aggarwal, Liberal Protectionism:The International Politics of Organized Textile Trade (Berkeley: University of California Press, 1985).In addition, see articles in International Organization on regimes for Antarctica, “Antarctica: TheLast Great Land Rush” 34 (Summer 1980), by M. J. Peterson; on nuclear proliferation,“Maintaining a Non-Proliferation Regime: 35 (Winter 1981), by Joseph S. Nye, Jr.; on civilaviation, “Sphere of Flying: The Politics of International Aviation” 35 (Spring 1981), by ChristerJonsson; on Third World debt, “The International Organization of Third World Debt” 35 (Autumn1981), by Charles Lipson; on international shipping, “The Political Economy of InternationalShipping: Europe versus America” 39 (Winter 1985), by Alan W. Cafruny; and on internationalcommodity regimes, “Trade Caps, Analytical Gaps: Regime Analysis and International CommodityTrade Regulation” 41 (Spring 1987), by Mark Zacher. Two recent book-length studies seeking toaccount for the evolution or persistence of international regimes are Charles Lipson, StandingGuard: Protecting Foreign Capital in the Nineteenth and Twentieth Centuries (Berkeley: University ofCalifornia Press, 1985); and Stephen D. Krasner, Structural Conflict: The Third World Against GlobalLiberalism (Berkeley: University of California Press, 1985).

31. On June 3, 1986, for instance, Soviet First Secretary Mikhail Gorbachev stated in a message to theSecretary-General of the United Nations that “it is quite obvious that there is a practical need tostart, without delay, setting up an international regime for the safe development of nuclear energy.”New York Times, June 4, 1986, p. A12. We do not presume to know what led Secretary Gorbachevto use the language of regimes, although Soviet scholars have informed us that they began to usethe term in relation to the Law of the Seas Conference in the 1970s. Personal conversations,Moscow, June 1986.

32. Stephen D. Krasner, “Regimes and the Limits of Realism: Regimes as Autonomous Variables,” inKrasner (ed.), International Regimes, pp. 355–68. But for an analysis of the impact of severalinternational regimes on relations between rich and poor countries, see Krasner, Structural Conflict:The Third World Against Global Liberalism (Berkeley: University of California Press, 1985).

33. For an early and insightful attempt, see Oran R. Young, Compliance and Public Authority(Washington: Institute for the Future, 1979).

34. Keohane defines myopic self-interest in terms of “governments’ perception of the relative costs andbenefits to them of alternative courses of action with regard to a particular issue, when that issue isconsidered in isolation from others.” After Hegemony, p. 99.

35. On the demise of the Bretton Woods international monetary regime, for example, see JoanneGowa, Closing the Gold Window: Domestic Politics and the End of Bretton Woods (Ithaca: CornellUniversity Press, 1983); and John S. Odell, U.S. International Monetary Policy: Markets, Power andIdeas as Sources of Change (Princeton: Princeton University Press, 1982). On rule evasion andcircumvention of textile restraints under the umbrella of the Multi-Fiber Arrangement, see DavidYoffie, Power and Protectionism: Strategies of the Newly Industrializing Countries (New York:Columbia University Press, 1983).

36. Abram Chayes’ study of the role of law in the Cuban Missile Crisis is an exception to the statementabout the absence of work on international norms, as embodied, for instance, in international

Notes 317

regimes. Chayes does not use the language of regimes, but he discusses the impact of internationalnorms for the peaceful settlement of disputes, as embodied in various international practices andagreements, including the Organization of American States and United Nations Charter. SeeAbram Chayes, The Cuban Missile Crisis and the Rule of Law (New York: Oxford University Press,1974).

37. Kenneth N. Waltz, Theory of International Politics (Reading, Mass.: Addison-Welsey, 1979).38. For a critique of Waltz’s work along these lines, see John Gerard Ruggie, “Continuity and

Transformation in the World Polity: Toward a Neorealist Synthesis,” World Politics 35 (January1983), pp. 261–85; reprinted in Robert O. Keohane (ed.), Neorealism and Its Critics (New York:Columbia University Press, 1986), pp. 131–57. An extended argument to this effect is provided inKeohane, After Hegemony, especially chaps. 1, 4–7.

39. Kenneth N. Waltz, “Response to My Critics,” in Keohane (ed.), Neorealism and Its Critics, pp. 322–46.40. For discussions about the analogy between grammar and systemic processes which facilitate

cooperation, we are indebted to Hayward Alker, Jr.41. On issue density, defined as the number and importance of issues arising within a given policy

space, see Robert O. Keohane, “The Demand for International Regimes,” International Organization36 (Spring 1982), reprinted in Krasner (ed.), International Regimes. The reference is to p. 155 of thelatter volume.

42. On this method of “process tracing,” see Alexander L. George and Timothy J. McKeown, “CaseStudies and Theories of Organizational Decision Making,” Advances in Information Processing inOrganizations 2 (1985), pp. 21–58; or Alexander L. George, “Case Studies and TheoryDevelopment: The Method of Structured, Focused Comparison,” pp. 43–68 in Paul Gordon Lauren(ed.), Diplomacy: New Approaches in History, Theory and Policy (New York: The Free Press, 1979).

43. There is actually a spectrum of goals between revolutionary and status quo. Moreover, these goalsmay be affected by the types of means available to states. See Barry Buzan, People, States and Fear(Chapel Hill: University of North Carolina Press, 1983).

44. The bipolar-multipolar distinction is emphasized by Kenneth N. Waltz, whose Theory ofInternational Politics carefully and systematically develops the notion of political structure whoseexplanatory inadequacy we are criticizing. For a recent discussion of the nineteenth century, seePaul W. Schroeder, “The 19th Century International System: Changes in the Structure,” WorldPolitics 39 (October 1986), pp. 1–26. Schroeder emphasizes the development of norms for theprotection of small countries. What he calls “changes in structure” would not be consideredstructural changes by Waltz, and we would refer to them as changes in the process of theinternational system.

45. We are indebted to William Jarosz and Lisa Martin for insightful comments that helped us toclarify the issues in this section.

46. Lloyd Etheredge, Can Governments Learn? (New York: Pergamon Press, 1985), p. 143: also“Government Learning: An Overview,” in Samuel Long (ed.), Handbook of Political Behavior 2(New York: Plenum Press, 1981), pp. 73–161.

47. Ernst B. Haas, “Why We Still Need the United Nations: The Collective Management ofInternational Conflict, 1945–1984,” Policy Paper in International Affairs, no. 26 (Berkeley: Instituteof International Studies, 1986), p. 68.

48. Ernst B. Haas, “Why Collaborate? Issue-Linkage and International Regimes,” World Politics32 (April 1980), p. 390. See also John D. Steinbruner, The Cybernetic Theory of Decision(Princeton: Princeton University Press, 1974); and Robert Jervis, Perception and Misperception inInternational Politics (Princeton: Princeton University Press, 1976).

49. Richard Neustadt and Ernest May, Thinking in Time (New York: The Free Press, 1986).50. Robert Axelrod, The Evolution of Cooperation (New York: Basic Books, 1984).51. For an argument that this should be a goal of farsighted policymakers, see Robert O. Keohane and

Joseph S. Nye, Jr., “Two Cheers for Multilateralism,” Foreign Policy 61 (Fall 1985), which isreprinted in this volume beginning on page 288.

318 Notes

TWO CHEERS FOR MULTILATERALISM

1. For a detailed account, see Robert O. Keohane, After Hegemony: Cooperation and Discord in theWorld Political Economy (Princeton: Princeton University Press, 1984), chap. 10, pp. 217–42.

2. United Nations Yearbook 34, 1980 (New York, 1983), pp. 1251–1344.3. For an excellent historical discussion, published well before the recent crisis, see Charles P.

Kindleberger, Manias, Panics, and Crashes (New York: Basic Books, 1978).

319

AAdjustment problems, 57Advocacy networks, 220–221Afghanistan, 249AFL-CIO, 132After Hegemony (Keohane), 267, 271Agenda setting

in complex interdependence, 27–28for oceans and monetary policies, 103–104politics of, 171–173, 180–181

Americanizationconjunctural politics and, 246–247globalization and, 230–231, 245

Anglo-American Joint Statement (1944), 68Annan, Kofi, 224, 229Argentina, 61“Art of War, The” (Sun Tzu), 238Asia. See also East Asia; specific countries

financial crisis in, 222, 237–238Asian Development Bank, 235Asian-Pacific Forum (APEC), 226Association of Southeast Asian Nations

(ASEAN), 226Asymmetrical interdependence, 10, 14–16, 192,

263, 268in Australian-U.S. relations, 173in Canadian-U.S. relations, 171, 173hard power and, 215

Australia, 42, 82Australian-American relations

history, 149–154issue hierarchy in, 151–153issue identification and outcomes in, 181–182transnational relations in, 150–152

Autarky, 38Authoritarian states, and information

revolution, 222Autonomy, of Canada, 164

BBalance of payments deficits, in U.S., 71Balance of power

agenda formation and, 103–104theories, 7

Bank for International Settlements (BIS), 70, 129oceans policy and, 93

Bank of England, 60, 100Bargaining

asymmetry and, 174Australian-American, 177

319

IndexCanadian-American, 157–163, 164, 174–176,

176–177interdependence and, 267–269

Barriers to entry, 223Beigie, Carl, 159nBelgium, 67Belgrade, 249Bilateral relations, 36, 185, 186. See also

specific countriesmonetary policy and, 92power in, 36

Biological globalization, 227, 229Bismarck, Otto von, 275, 279Bosnia, 238, 250Bouteflika, Abdelaziz, 229Brazil, 237, 248, 251, 293Bretton Woods regime, 11, 17, 18, 46, 57n, 67, 68,

115, 119, 137nadaptation of, 69collapse of, 116erosion of, 71–72full establishment of, 69–70international organization model and, 130issue structure model and, 119military power and changes in, 113monetary policies and, 101suspension of convertibility of dollar into gold, 69United States economic strength and, 38

Britainand monetary regimes, 11, 68–69, 70, 119as monetary leader, 35, 58–63, 89, 112, 117as naval power, 37, 55, 78–79, 80, 113, 122and oceans regimes, 81, 83, 85–86, 124, 131U.S. loan to, 5–6, 29

Bundy, McGeorge, 25Burke-Hartke bill, 203

CCable television, 240Cambodia, 262Canada

oceans policy of, 81, 86in postwar period, 39relations with, 16

Canadian-American relations, 46. See also Conflictsagenda formation politics in, 171–173agenda mapping in, 159alternative regime change explanations and,

184–185complex interdependence and, 143–149

Note: The letter ‘n’ following the locators refers to notes cited in the text.

320 Index

Canadian-American relations, (Continued)economic issues in, 144–149intergovernmental bargaining and, 155–162issue identification and outcomes in, 155–166military force and, 143–145multiple channels of contact and, 145social issues and, 147–148socioeconomic issues and, 154transgovernmental politics and, 29

Capitalismglobalism and, 244–245internationalized, 33

Capital markets, 237, 247–248pluralization in, 242

Caracas, law of the sea meetings in, 99China, 220

Belgrade embassy bombing and, 249globalization and, 251monetary connections and, 58oceans policy and, 81postwar economic order and, 39

Churchill, Winston, gold standard and, 66Civil wars, 241Coalitions, 28, 30, 127Cold War, 4–6, 40, 93, 212, 244–246Collective leadership, 198, 199Collective security, 204Commercial information, 215Common Market, 40Communication channels, NGOs as, 218Communications

complex interdependence and, 240–242information revolution and, 211–214reduced costs and, 239–240sensitivity interdependence and, 11transnational, 21

Communist Manifesto (Marx and Engels), 224Communities, virtual and geographical, 222Complex interdependence, 269–272. See also

Monetary policy; Oceans policy; specific issuesapplicability of, 24Australian-American relations and, 149–154Canadian-American relations and, 143–149characteristics of, 20–24as ideal type, 19information revolution and, 211international organization model and, 48leadership in, 196–198military force and, 22–24monetary and oceans issues and, 97–99political processes of, 24–30, 31power in, 192–193realism and, 19–20transnational participation and, 240–242trends toward, 193–196use of term, 265–266

Conference diplomacy, oceans policy and, 99–100

Conference on the Law of the Sea. SeeUnited Nations

Conflictsin Australian-American relations, 166–170, 174beginning of, 163in Canadian-American relations, 156–157,

163–168, 173–175interdependence and, 8outcomes of, 163religion and values in, 226

Congress, national security and, 5–6Connally, John B., 90, 98, 101, 148, 182Consultative arrangements, and domestic and

foreign policy, 22Conventional weapons, force and, 24Convertibility, of currency, 68, 116Coolidge, Calvin, 279Cooperation, 280

interdependence and, 8, 110Coordinated intervention regime, 116Credibility, 221

politics of, 219–221Cross-border effects, 254Cultural globalism, 228Cunliffe Committee report, 60, 65Currencies

confidence in, 57ndiscount rates and liquidity of, 61floating, 65, 66–67, 72, 73, 74–75, 121–122,

136–137liquidity of, 57n, 116par values of, 68

Cyberspace, 212Czechoslovakia, 106

DDecentralization, information revolution and, 217Defense issues, in Canadian- and

Australian-American relations, 174De Gaulle, Charles, 23Deglobalization, 257Democracies, and information revolution, 219Departments, of U.S. government, 22Dependence

cost of, 11–12meaning of, 7

Detente, 6Devaluation. See also specific currencies

of dollar and pound sterling, 72gold standard and, 67

Dickey, John S., 171nDiefenbaker, John, 165, 173nDillon Round tariff cuts, 40Distribution of power

regime changes and, 117underlying, 49

Dollar, 64, 71, 72

Index 321

Domestic organization, international organizationand, 201–207

Domestic politicsglobalism and, 248–250interdependence and, 7of interest formation, 271–272international leadership and, 133power and, 36structural explanations and, 44–45systemic explanation limits and, 131–135

Drilling rights, 75, 83Dulles, John Foster, 114Dyadic conflicts

Australia-U.S. (1950–69), 168Canada-U.S. (1950s), 158–159

EEast Asia, 250East Timor, 229East-West relations, force and, 23Ecological interdependence, 7, 203, 204, 205, 207Economic Consequences of the Peace, The (Keynes), 224Economic globalism, 227, 229, 251

distance and, 242–243Economic growth model, 180Economic interdependence, 5, 11, 203, 207, 231

and international regime changes, 32–35with Japan, 234

Economic issues, separation and depoliticization of, 35Economic policy, oceans policy and, 75Economic processes, regime change and, 110–112Economic process model

power of, 137regime change and, 32–35, 137

Ecuador, 80–82, 102Efficiency, sacrifice of, 34Enforcement powers, of hegemonic state, 38Engels, Friedrich, 224Environment. See also Ecological interdependence

emissions and, 232intergovernmental interests and, 30

Environmental globalism, 228, 231, 236, 238–239Cold War ending and, 245distance and, 243

Equity, and political effects of inequality, 250–252Eurodollar market, 71

monetary issues and, 95Europe. See also specific countries

American policy toward, 115competitive position of, 132economic perceptions and, 40hierarchical patterns and, 40monetary policy after World War II, 68in postwar period, 39Third World relations with, 40U.S. hegemony and, 38

European Community, 17

European Economic Community, 43European Payments Union (EPU), 69, 70, 116European Recovery Program, 68Evatt, Herbert B., 150Exchange

benefits of, 231controls over, 69

Exchange rates, 57, 293–294. See also Gold standard;Pegged exchange rates

under Bretton Woods regime, 57neconomic process model and, 112flexible, 72floating, 65, 67large-scale changes in, 121–122after Tripartite Monetary Agreement, 67

FFederal Reserve Banks, monetary issues and, 100,

246Financial crisis, worldwide impact of, 237–238Fisherman’s Protective Act (1954), 102, 114Fishing and fishing rights, 56, 87, 102–103, 132,

133n. See also Oceans policydisputes over, 87jurisdiction and, 82oceans policy and, 75three-mile limit and, 78Truman Declaration and, 80between World Wars I and II, 123

Food and Agriculture Organization (FAO), 287Food shortages, intergovernmental interests

and, 30Foreign affairs, agendas of, 21–22Foreign investment, 237Foreign policy, 283–285. See also Monetary policy

interdependence and, 7traditional, 192unrealistic visions of, 286–292

Formal international institutions, 46Fowler, Henry, 25France, 293. See also specific issues

franc in, 65gold bloc and, 67gold standard and, 62, 63, 66monetary policy and, 119and Tripartite Monetary Agreement (1936), 67

Free information, 215Free seas policy, 113

erosion of, 126jurisdiction and, 83

Free seas regime, 78–81Fulbright, William, 183

GGeneral Agreement on Tariffs and Trade (GATT),

17, 18, 30, 40, 43, 235, 282General Agreements to Borrow (1962), 70, 94

322 Index

General Assembly, 47. See also United NationsGeneva Convention on the High Seas (1958),

82, 90free seas regime and, 78oceans policy and, 84

Genoa Conference (1922), 65–66Germany, 275. See also Mark (Germany);

specific issuesdefault on reparations, 66freedom of the seas and, 79gold standard and, 62, 63, 66monetary policy and, 100–101

Global capitalism, 245–246Global interdependence, 3–5Globalism

biological, 227characteristics of, 225–226Cold War and, 244–247communications costs and institutional

velocity, 239–240density of networks in, 236–239distance and, 242–244and domestic politics, 248–250economic, 227environmental, 228governance of, 254–258interdependence and, 234–236migration and, 227military, 227multidimensional nature of, 226–229social and cultural, 228transnational participation and complex

interdependence, 240–242Globalization, 225–226

Americanization and, 230–231, 245, 246–247and Cold War ending, 244–247compared with globalism, 230interdependence and, 225–236maldistribution of benefits of, 250political implications of, 228–229power, networks, and, 252–254of world economy, 214

Global networks, “uploading” and “downloading” of, 230–231

Global unilateralism, 294Global village, 3, 211Goals, 277–278

of complex interdependence, 25of realism, 23–24

Gold, 116concern with, 58role as monetary asset, 57role in international monetary system, 72during and after World War I, 64–67

Gold bloc, 67Gorbachev, Mikhail, 245Governance, of globalism, 254–258

Government, as international financial institutions, 68

Governmental bureaucracies, multiple channels ofcontact between, 28–29

Governmental institutions, globalism and, 249Great Britain. See BritainGreat Lakes pollution, 161nGreat Transformation, The (Polanyi), 252Greenpeace, 221Grenada, 262Grotius, Hugo, 78Group of Seventy-seven, 127Group of Ten, 70, 94, 129Guatemala, 262

HHague, The

free seas regime and, 80law of the sea and, 76

Hague Conference (1930), 80, 83, 90, 106Harding, Warren, 123Hard power, 216, 218Hegemonic leadership, 196Hegemonic stability, 272Hegemony erosion

economic collapse and, 38limitations of overall structure explanation, 39–41limitations of theory, 41, 131and regime change, 35–39secondary powers and, 38

Hierarchy of issues, 194, 195absence in interstate relations, 20, 21–22, 27–29in Canadian-American relations, 147–148changes in, 40and oceans policy, 90–93after World War II, 131

Hitler, Adolf, 220, 275, 279Holland, gold bloc and, 67Hong Kong, 238, 248Hub and spokes dependence model, 252–253Human rights, 229

IIAEA. See International Atomic Energy Agency

(IAEA)IBRD. See World BankIEA. See International Energy Agency (IEA)IJC. See International Joint Commission (IJC)IMCO. See International Maritime Consultative

Organization (IMCO)India, 248Indonesia, 238

oceans policy and, 87Industrial Revolution, 250–251Information

collection and production of, 215–216control of, 218

Index 323

distance and, 243politics and, 213power among states and, 216velocity of, 239–240volume of, 217

Information revolution, 211complex interdependence and, 211–214effect of, 221power and, 216–219, 220transmission costs and, 212

Insecurity, economic interdependence and, 34Institute of International Law, oceans policy and, 94Institutional setting, politicization patterns and, 28Intelligence collection, 217–218Interagency Task Force on the Law of the Sea, 90Inter-American Council of Jurists, 114Interconnectedness, globalization and, 232–233Interdependence. See also Asymmetrical

interdependence; Bargaining; Complexinterdependence

as analytic concept, 7–9asymmetrical, 14–16bargaining and, 267–269coping with, 189–207defined, 232economic, 5, 11, 32–35, 203global, 3–5globalism and, 225–236joint gains or losses and, 8–9manipulation as instrument of power, 14, 15meaning of, 225networks of, 252political aspects of, 11, 264political sensitivity, 11power and, 9–16, 261–266relative gains and distributions and, 8, 9rhetoric of, 5–7sensitivity and, 10, 11, 15symmetry of, 182–183use of term, 265vulnerability and, 10, 11–12in world politics, 3–5

Interest Equalization Tax, 72Interest rates, Britain, gold standard, and, 61Intergovernmental organizations. See International

organization(s)Intergovernmental Panel on Climate Change

(IPCC), 221Interim Committee, of IMF, 129, 130Interim Committee of Board of Governors on

Reform of the International Monetary System,of IMF, 73–74, 92

Interior Department, 127International Atomic Energy Agency (IAEA), 285International debt, 293International Energy Agency (IEA), 283Internationalists, national security and, 5

International Joint Commission (IJC), 182International law, enforcing, 17International Law Association, oceans policy

and, 94International Law Commission, 114

oceans policy and, 83, 90International Law Committee, of League of

Nations, 83International Maritime Committee, 94International Maritime Consultative Organization

(IMCO), 106, 127International Monetary Fund (IMF), 30, 40, 129,

235, 282. See also Special Drawing Rights (SDRs)

Articles of Agreement of, 68, 73Bretton Woods and, 68–69gold standard and, 67international organization model and, 46monetary issues and, 107price sensitivity and, 11

International monetary regimes, 115–117International Oceanographic Commission

(IOC), 95, 127International organization(s), 17, 189, 271

Canadian-American relations and, 182–183diagram of, 47–48domestic organization and, 201–207factors underlying, 48international monetary area and, 129–130oceans policy and, 93–94, 126–128regime change and, 46–49, 125–130regime persistence and, 126role of, 29–30roles in monetary issues, 106–107roles in oceans issues, 106–107systemic explanations and, 131–132use of term, 46

International regimes, 5, 242, 251–252change in, 16–18, 32–51, 110–117, 125–130,

179–186, 262, 272–275compliance with, 289, 293creation of after World War II, 282–284definition of, 266exchange rates and, 293–294focus of on future, 290–291functions of, 284–285institutions of, 284to insure against catastrophe, 289international debt and, 292issue structure in, 42–46, 117–124life cycles of, 290maintenance of, 292–293monetary issue area in, 63–74, 113–114necessity of, 287–288need for, 284–285power of, 285power structure and, 35–41, 112–117, 265–266

324 Index

International regimes (Continued)processes in, 18–19, 110–111, 179right moment for, 290–291role of in learning, 278rules and, 18, 43, 118–120self-enforcement in, 287–290self-interest and, 274–275state behavior and, 274–275strategic approach to, 286–292

International Trade Organization, 17International transactions, 7Internet, 213, 215, 218, 253Interstate agreements, international regimes

and, 17–18Interstate relations, 20

absence of hierarchy among issues in, 20, 21–22cooperative, 16

Iran, 248, 249Iran-Iraq War, 262, 283Iraq, 248Isolationism, 204Israel, 262Issues

absence of hierarchy, a characteristic of complexinterdependence, 21–22, 26–27, 90–93, 194

agenda setting and, 27–28, 83, 102–104, 171–173Australian-American relations and, 153–156,

166–170, 181–182Canadian-American relations and, 145–148,

155–166, 171–173, 183–184depoliticization of economic, 34–35nonstructural incentives and density of, 277structural hierarchy and, 42–46, 117–124,

153–156, 183Issue structure model, 42–46

limitations of, 44–46regime change and, 117–124

JJapan, 245, 249. See also Yen

American policy toward, 115competitive position of, 132economic perceptions and, 40fishing by, 123monetary policy and, 119naval power of, 124oil price sensitivity and, 10–11in postwar period, 39U.S. hegemony and, 38U.S. relations with, 185, 234–235

Johnson, Lyndon B., 116, 148, 177

KKennedy, John F., 5, 116, 203, 285Khrushchev, Nikita, 244Kierans, Eric, 173Kirkpatrick, Jeane, 282

Korean War, 279Kosovo, 229, 238, 248Kuwait, 219

LLandmine Conference (1997), 220Laos, 250Latin America, 80, 113Law of the sea, 76–77Leadership, 189

and action to stabilize international regime, 197collective, 198in complex interdependence, 196–198difficulty of, 132domestic politics and, 133hegemonic, 198multiple, 199nonhegemonic, 197–198stability of economic systems and, 37systemic explanation limits and, 131–135unilateral, 196–198unitary, 198

League of Nations, 65, 80, 83, 106Learning, perceptions and, 278–280Lebanon, 262, 293Legitimacy, of international regime, 117Less developed countries (LDCs), 18, 106, 285Liberals, 264, 276–277Libya, 262Life cycles, of international regimes, 290Linkage strategies, 193, 268

in Australian-American relations, 150–151,153–154

in Canadian-American relations, 148, 180, 183complex interdependence goals and, 25–26dominance and, 25–26economic zones and, 105–106in monetary policies, 106in oceans policies, 105–106

Local political activity, 212London Economic Conference (1933), 67,

89, 112Long-Term Capital Management, 237, 248

MMacDonald, Ramsey, 67Macmillan Report (1931), 60Malaya, 89Maritime policy. See also Oceans policy

labor policy and, 77Market(s)

information and, 240science and, 247

Marshall Plan, 5, 68, 69Marx, Karl, 224Mayaguez case, 87Mbeki, Thabo, 229

Index 325

Meany, George, 203Mexican-American relations, 185Mexico, 293Migration, 227Military force, 19–20, 194–195, 262

in Australian-American relations, 150in Canadian-American relations, 144–145changes in perceptions of, 39complex interdependence and, 20–21, 25, 96–98as instrument of state policy, 102–103international organization and, 128minor role of, 22–24in monetary policy, 85–90, 102–103national security and, 6in oceans policy, 56, 85–90, 102–103in peacetime oceans issues, 88realism and, 24–25role of, 4–5utility of, 26vulnerability interdependence and, 14

Military globalism, 227, 229, 234, 238–239, 241Cold War ending and, 245–246distance and, 243domestic politics and, 248

Military interdependence, 3, 231–232with Japan, 235–237

Military powerdistribution of, 125information revolution and, 215international economic order and, 39oceans, monetary policies, and, 113political leadership and, 116

Military technology, oceans policy and, 88Military threat, communist, 40Milosevic, Slobodan, propaganda and, 220Mineral rights. See also Oceans policy

deep-water, 56oceans policy and, 75–76seabed and, 84

Modernistsaccuracy of, 211–212vs. traditionalists, 3–4

Monetary arrangements. See Bretton Woods regimeMonetary Committee, of EEC, 94Monetary issue area, 56

agenda formation for, 102–104domestic concerns, 132international organizations and, 106–108international regimes and, 11, 57–58, 63–74issues linkage and, 91issue structure model and, 119–122multiple channels, 93–95political hierarchy, 62politicization of, 100–101, 134regime change and, 110–112role of force in, 88–90, 102sensitivity dependence in, 10

structure-regime incongruities in, 125transgovernmental relations and, 99–101, 107

Monetary power resources, 121Monetary regimes (1920–76), 63–74Montevideo Declaration (1970), 82“Moore’s Law,” 310nMoreau (Governor), 89Morgan, J.P., and Company, 95Morgenthau, Henry, 68Moynihan, Daniel, 283Multilateral collaboration, 255–256Multilateralism, 282–294Multinational firms, 14

Canadian-American relations and, 172communication and, 211globalism and, 239monetary issues and, 95–96, 121multiple channels and, 21

Multiple channels of contact, 20, 21, 194, 214,242–243

among advanced industrial countries, 21in Australian-American relations, 150–151in Canadian-American relations, 145in monetary issues, 95–96in oceans issues, 93–94transnational and transgovernmental relations

and, 28–29Multiple leadership, 198, 200Multitrack regime, 35Munich, 279Myanmar, 250“Myth of National Interdependence, The” (Waltz),

263

NNational interest

defining, 203transgovernmental policy networks and, 29

Nationalism, of Canadian bargaining, 148, 164National Power and the Structure of Foreign Trade

(Hirschman), 263National security

agenda setting and, 27–28in Cold War, 5–6symbolism of, 6–7

National Security Council, 5Nation-state, global governance by, 255Neoclassical economic analysis, 32Neorealist analysis, 266Nepal, 250Netherlands, ocean policy and, 81Network effects, 236–239Networks, power and, 252–254New International Economic Order, 18, 30New Zealand, 150Nicaragua, 262Nixon, Richard M., 6, 90, 98, 130, 132, 244

326 Index

Nondiscriminatory trade, 117Nongovernmental organizations (NGOs),

information and, 214, 216, 240Nonhegemonic leadership, 197–198Non-Proliferation Treaty (NPT), 228, 285Nonregime situation, 17Norman, Montagu, 100Norms, of international organizations, 30North Korea, 87, 279North-South relations, force and, 23Nuclear policy, oceans policy and, 85–86Nuclear weapons, 24, 129

OOceans issue area, 75–85

agenda formation for, 103–104changes in regimes and, 18classical free seas regime and, 78–79domestic concerns and, 132complex interdependence and, 21, 96international organizations and, 94–95, 106–107issue hierarchy ambiguity in, 42, 84, 90–93,

126–129linkage of issues in, 104–106multiple channels and, 93–95naval power and bargaining regarding, 77peacetime regime and, 77regimes and, 79–83, 113–115role of force and, 85–91, 102–103territorial limits question in, 77transgovernmental relations and, 99–100

OECD. See Organization for Economic Cooperationand Development (OECD)

OEEC. See Organization for European EconomicCooperation (OEEC)

Offshore drilling, 75, 83Oil. See also Petroleum politics

Canada and, 183, 184oceans policy and, 76, 102–103offshore drilling and, 75

Oil Forum, 114OPEC. See Organization of Petroleum Exporting

Countries (OPEC)Organizationally dependent capabilities, 47Organization for Economic Cooperation and

Development (OECD), 17, 40, 46, 70, 129oceans policy and, 94

Organization for European Economic Cooperation(OEEC), 69, 70, 94

Organization of American States, oceans policy and, 102

Organization of Petroleum Exporting Countries(OPEC), 23, 37, 72

Overall structure modeladequacy of, 115–117Australian-American relations and, 181Canadian-American relations and, 180

distribution of capabilities and, 46failure of, 125–126hegemony erosion and, 39–41international monetary area and, 115international organization model and, 47limitations of issue structuralism, 44–46overall structure and regime change, 112–117power of, 137regime change and, 42–46, 137*/of system, 18

PParadox of plenty, politics of credibility

and, 219–223Pardo, Arvid, 76, 79, 81Pax Britannica, 55Peacekeeping, by UN, 293Peacetime, oceans space and resources regulation

during, 77, 86Pearl Harbor, 235Pearson (Prime Minister), 148Perceptions, learning and, 278–280Perfect competition, 33Peru, fishing rights and, 102Peterson, Peter, 132Petroleum politics. See also Oil

and world political power, 36–37Pluralistic approaches, critics of, 33Pluralization, 242Political integration

and Canadian-American relations, 179international regimes and, 18

Political issues. See also Monetary policy; Oceans policy

British gold standard and, 61–62economic model of regime change and, 34equity and inequality, 250–252force and, 102–103globalism and, 231

Political processes, 24–30, 31agenda setting and, 27–28international organizations and, 29–30linkage strategies and, 25–26in money and oceans, 97–107realism, complex interdependence, and, 31systemic, 275–278transnational and transgovernmental relations

and, 28–29Political sensitivity interdependence, 11Political stability, economic globalization

and, 252Political structures, of issues, 42–46Politicization, 134

bargaining and, 176Canadian relations and, 148–149linkage and, 193sources of, 27–28

Index 327

Politicsof agenda setting, 27–28and Americanization of globalism, 246–247conjunctural, 246–247of oceans and money, 55–56, 85in oceans policy, 83–84

Politics of credibility, paradox of plenty and,219–223

Pollution, 239Canadian-American relations and, 161n

Postwar economic order, divisions of, 39Postwar period

Australian-American relations in, 181Canadian-American relations in, 179–180economic features of, 33

Pound sterlingdevaluation of, 70–71, 72gold standard and, 64in 1920s, 65sterling-franc rate and, 57

Poverty, movement out of, 250Power

asymmetrical interdependencies and, 14–15in bilateral relations, 36in complex interdependence, 192–193concept of, 9–10defined, 10distribution of, 14, 26, 27domestic politics and, 36economic, 10explanations of, 49–50information and, 214–215, 216interdependence and, 9–17, 224–225,

273–278networks and, 262political processes and, 24regime changes and, 117structural explanations and, 44–45structural model failure and, 125–126underlying distribution of, 48–49in world politics, 36–37

Power and Interdependence (Keohane and Nye)limitations of structural theory and, 275–278perceptions, learning, and, 290–292research program of, 266–275themes of, 261–266

Power structurebefore Bretton Woods breakdown, 120regime change and, 35–41spread of changes in, 37underlying, 43

Process, structure and, 18Propaganda, 220Protectionism, 132, 293

economic interdependence and, 34Public opinion, broadcasting and, 218Pueblo (ship), 87

RRambouillet summit meetings, 129, 199Raw materials, economic power and, 10Reagan, Ronald, 283Realism, 4, 261, 263. See also Traditionalists;

specific issuesapplicability of, 24and complex interdependence, 19–20military security as goal in, 25political, 4political processes under, 31role of international organizations, 29

Regime change, 16–18, 268, 272–275agreement on, 130Australian-American relations and, 184Canadian-American relations and, 179–186combining explanations of, 49–50economic process model of, 32–35, 110–112,

136, 137four models of, 50hegemony erosion and, 35–39international organization and, 125–130international organization model of, 46–49issue structure model of, 42–46, 117–124limitations of eroding hegemony argument, 41oceans policy and, 90, 91overall structure model of, 39–41, 112–117,

136, 137power structure explanation of, 35–41technology, economic change, and, 33

Regime process model, power relations in, 126Regional-integration theory, 263, 264Regionalism, globalization and, 255Report on Foreign Policy for the 1970’s, 76Research program, 266–275, 280Resources. See also Mineral rights; Oceans policy;

specific resourcespower over, 10

Ricardo, David, 231Roosevelt, Theodore, 234Ruhr, occupation of, 66Rule-making

international regime and, 117in oceans and money, 110–139political activity in issue area and, 43–44politics in oceans issue area, 106powers of hegemonic state, 38strong and, 37, 117

Russia, 237. See also Soviet UnionRwanda, 220

SSchacht, Hjalmar, 100Science, market linkages with, 247Scientific Committee on Oceans Research

(SCOR), 94Seabed, resources and arms control issues, 83–84

328 Index

Seabed Committee, 105, 127, 128Secondary states, hegemonic erosion and, 38Security, 204

Australian-American relations and, 150–151,152, 180–181

Canadian-American relations and, 145, 182–183monetary policy and, 89U.S. leadership in, 40

Self-sufficiency, 204Sensitivity

globalism and, 232–233power, interdependence, and, 10–12in trade, 13–14vulnerability and, 10, 11–14

Sensitivity dependence, and regime change, 126Sensitivity interdependence, 15Serbia, 248Shelf jurisdiction, oceans policy and, 81Shipping, 79

oceans policy and, 75Shultz, George, 101Silicon Valley, 247Simon, William E., 73Singapore, 222Six-mile limits, 80Smithsonian Agreement, 72, 129Smuggling

freedom of the seas and, 79, 80oceans policy and, 94, 113U.S. and, 123

Social globalism, 228domestic politics and, 248

Social sensitivity interdependence, 11Socioeconomic issues

in Australian-American relations, 151in Canadian-American relations, 145–148

Sociopolitical vulnerabilities, 13, 14Soft power, 216–217, 219–220, 221–222Somalia, 238, 248South Korea, 250, 279Soviet Union. See also Cold War

fear of, 115, 116force and oceans policy, 86, 87freedom of the seas and, 79IMF and, 68monetary connections and, 58naval power of, 123oceans policy and, 85–86postwar economic order and, 39power structure, oceans regime, and, 113–114sensitivity in trade and, 13–14

South Pacific and, 148–149strategic interdependence and, 8threat from, 40United States and, 35

Sparta, Athens and, 35Special Drawing Rights (SDRs), 57n, 70, 73

Stalin, Joseph, propaganda and, 220Standard of living, governments and demands

for better, 33Sterling. See Britain; Gold standard; Pound

sterlingSterling-franc rate, 57Stockholm Environment conference, 30Stock market crash, monetary policy

and, 95Strategic information, 213–214Strategic interdependence, 8Strength, rules and, 37, 117Structural change, war and, 36Structural theory, limitations of, 275–278Subject perceptions, policies and, 56nSudan, 238Suez invasion, 41Summit conferences, 199Sun Tzu, 238Surplus, Soviet sensitivity to, 13Surveillance, 199Survival, interdependence rhetoric and, 7Switzerland, gold bloc and, 67Symbolism, of national security, 6–7Systemic explanations, 131–135, 191Systemic political processes, 275–278

TTaiwan, 238Tariff, Dillon Round cuts in, 40Technical characteristics, politicization

patterns and, 28Technological changes, in monetary and oceans

policies areas, 110Technology, 4

economic change and, 33military, 88oceans policy and, 75–76, 82–83role of change and, 211

Telecommunications, 3, 211Test Ban Treaty (1963), 40Thailand, 238Thatcher, Margaret, 244Theories, role of, 4Third World, 23, 30, 39–40, 105–107Tous azimuts strategy, 23Trade

comparative advantage and, 8–9sensitivity in, 13–14

Trade barriers, monetary cooperation and, 67Trade Expansion Act (1962), 5–6, 203Trade wars, 120

with Australia, 149Traditionalists. See also Realism; specific issues

complex interdependence characteristics and, 21

vs. modernists, 3–4

Index 329

Transaction costs, of information, 221Transactions

economic, 71interdependence and, 8

Transgovernmental networks, 128monetary issues, 107policy networks, 28–29

Transgovernmental relations, 21, 28–29, 46–47,97–98, 175, 182–183, 266

monetary issue area in, 98–99, 105, 129oceans issue area in, 98, 123policy coordination in, 198–199, 206

Transnational communications, 21Transnational networks, 128, 221Transnational organizations, 121

and Canadian-American and Australian-Americanissues, 173, 174, 178–179

in Canadian-American relations, 178Transnational participation, complex

interdependence and, 240–242Transnational politics, structural explanations

and, 44–46Transnational relations, 21, 28–29, 34, 94–95, 175,

178, 180, 262–263, 266importance of, 266

Transnational Relations and World Politics (Keohaneand Nye), 262

Treasury Department, U.S. international financialpolicy and, 58

Trends, 138, 193–196toward inequality, 250

Trilateral Commission, 21Tripartite Monetary Agreement (1936), 67, 112Tripolar naval structure, 123Truman, Harry S, 279

IMF and, 69national security and, 5

Truman Declaration (1945), 104, 113, 132, 135oceans policy and, 80, 81

Truman Doctrine (1947), 40

UUNCTAD. See United Nations Conference on

Trade and Development (UNCTAD)Unilateral initiative, 196–198Unipolar prewar naval structure, 123Unitary leadership, 198United Nations, 46, 282, 294

Conference on Trade and Development (1964),18, 47, 282

erosion of free seas regime and, 126General Assembly of, 47International Atomic Energy Agency

(IAEA), 285monetary issues and, 107on ocean rights, 81, 84peacekeeping by, 293

proposals for New International Economic Order, 30

Seabed Committee, 105, 127, 128United Nations Conference on Trade and

Development (UNCTAD), 127United Nations Educational, Scientific, and

Cultural Organization (UNESCO), 229, 282United States

Canada and, 143–147dollar and, 71economic strength of, 38effective foreign policy for, 286–292European finances and, 69force and oceans policy, 86, 87globalization and, 252gold standard and, 66–67international economic position of, 120monetary leadership after World War II, 131monetary rule-breaking by, 119–120oceans policy of, 80, 83oil price sensitivity and, 10–11postwar economic order and, 39power structure, oceans regime, and, 113,

114–115as preponderant naval power, 123prominence in international economy, 63regime maintenance and, 292–294relative economic strength of, 39sensitivity in trade and, 13–14sensitivity under Bretton Woods and, 11short-run economic sacrifices in, 40Soviet Union and, 35transgovernmental contacts of, 206–207and Tripartite Monetary Agreement, 67

United States government, departments of, 22Uruguay round, 242

VVelocity, globalism and, 239–240Vietnam, 262Virtual communities, 220Vulnerability interdependence, 13–14, 103

asymmetry and, 174globalism and, 232power and, 10sensitivity and, 12–14

WWashington Naval Agreements (1921), 234Washington Naval Conference (1922), 123Weak states, international organizations and, 30Wealth, inequalities of, 250–252Wealth of Nations (Smith), 224, 239Weapons, force and, 24Welfare, economic, 33–34Welfare-oriented responses, to economic and

technological change, 110

330 Index

Welfare state, 252West, opposition to military conflicts in, 24Wilhelm (Germany), 279Wilson, Woodrow, 278World Bank, 40, 68, 238, 282World economy, 212World political structure, international organization

model and, 46–49World politics, 36–37, 138, 194–196World trade, growth of, 33World Trade Organization (WTO), 228, 256

World War I, 55, 63, 122–123World War II, 68, 81, 90, 150World Wide Web, 217

YYen, overvaluation of, 71Yugoslavia (former), 248

ZZacher, Mark, 316nZumwalt (admiral), 305n